Civil Apeal Nos
2204 47 of 1980
From the Judgment and Order dated 15101979 of the High Court of Karnataka in WA No 1101 to 1144 of 1979
PR Ramasesh for the Appellants
TS Krishnamurthy Vineet Kumar and H Raghavendra Rao for the Respondents
KANIA J
These appeals arise from the decision of a Division Bench of the High Court of Karnataka in Writ Appeals Nos 1101 to 1144 of 1979
It appears that the Government of Karnataka decided to adopt a policy to encourage rapid industrialisation
An Order No CI 58 FMI 69 dated 30th June 1969 was issued which recited that the Government namely the Government of Karnataka was committed 948 to a policy of rapid industrialisation and that in pursuance thereof the Government had on 30th November 1966 issued directions indicating the incentives that would be given to entrepreneurs starting new industries in the Mysore State
The material part of the said order for our purpose runs thus Consequently the Governor of Mysore is pleased to sanction the following incentives and concessions to the entrepreneurs for starting new industries in Mysore State 1 Sales Tax A cash refund will be allowed on all Sales Tax paid by a new industry on raw materials purchased by it for the first 5 five years from the date the industry goes into production eligibility to the concessions being determined on the basis of a certificate to be issued by the Department of Industries and Commerce    By an order dated 11th August 1975 the procedure was prescribed for obtaining the concessions given under the orders referred to earlier
On 12th January 1977 the Government of Karnataka issued another order which recited that the reasons for making the said order of 12th January 1977 were that the scheme of concessions adopted by the Government earlier had given room for many types of misuse and the earlier orders had not prescribed any ceiling limits or restrictions on the quantum of refund of sales tax or concessions to be granted
The said order dated 12th January 1977 inter alia provided as under i The concession of refund of sales tax on raw materials used by new enterprises should be limited to 10 per cent of the cost of fixed assets per year thus not exceeding the total of 50 per cent over a period of five years for which the concession is available
Where the annual sales tax paid on raw materials is less than 10 per cent of the cost of the fixed assets according to the original value the concession will be limited to the actual sales tax paid   Several persons claimed that they had started new industrial units in the State on the assurances extended or because of the concessions granted to them inter alia under the said order dated 30th June 1969
They filed writ petitions before the High Court of Karnataka claiming that the industrial undertakings started between 30th June 1969 when the order dated 12th June 1969 came into effect and before 949 the order dated 12th January 1977 was issued could not be deprived of the concessions given to them by the former order as the said grant of concessions constituted a promissory estoppel against the Government on the basis of which they had acted by starting new industries requiring investment of considerable funds and the Government was not entitled to go back or that promise as it had sought to do by the order dated 12th January 1977
A learned Single Judge of the Karnataka High Court before whom these writ petitions were filed upheld the aforesaid contention of the petitioners urged before him relying mainly on the rulings of this Court in Union of India vs Ms
Indo Afghan Agencies Limited   Century Spinning and Manufacturing Company Limited  Anr
vs The Ulhasnagar Municipal Council  Anr 1970 3 SCR 854 and the ruling in Ms Motilal Padampat Sugar Mills Company Pvt Ltd vs State of Uttar Pradesh  Ors  In the concluding portion of his judgment the learned Judge clarified that he had not examined the correctness of the individual claims made by the petitioners and that these claims would have to be examined by the competent authorities
He further clarified that the order dated 12th January 1977 would undoubtedly apply to industries started after that date
The learned Trial Judge allowed the writ petitions and granted relief on the basis set out earlier
An appeal preferred by the Assistant Commissioner of Commercial Taxes Dharwar Deputy Commissioner of Commercial Taxes and the Government of Karnataka before a Division Bench of the Karnataka High Court was dismissed by the Court which agreed with the reasoning of the learned Trial Judge
It is from this decision that the present appeals arise
The first contention of the learned counsel for the appellants is that the doctrine of Promissory Estoppel was not applicable in the present case because it was found by the Government of Karnataka that the concessions granted under the said order dated 30th June 1969 were being misused and undue advantage was being taken of the same
It was submitted by him that in view of this it would not be proper to hold the Government to the promises or the assurances it had given under the said order dated 30th June 1969
We are afraid it is not possible to accept this submission
No counter affidavit was filed by the appellants before the Trial Court in the writ petition
Beyond the statement of counsel there is nothing to show that any misuse was made of these concessions or undue advantage taken of the same
It is true that the preamble to the order dated 12th January 1977 does recite that the concessions given by the earlier order had given room for many types of misuse but such a recital by itself cannot establish 950 that the concessions were in fact misused
If that were so it was the duty of the Government and the concerned authorites to file a counteraffidavit and place the relevant facts establishing the misuse before the Court
This they have totally failed to do
It is well settled that if the Government wants to resile from a promise or an assurance given by it on the ground that undue advantage was being taken or misuse was being made of the concessions granted the Court may permit the Government to do so but before allowing the Government to resile from the promise or go back on the assurance the Court would have to be satisfied that allegations by the government about misuse being made or undue advantage being taken of the concessions given by it were reasonable well established
In the present case there is nothing on record to show that any such misuse was being made or undue advantage taken of the said concessions by the newly established industries
The Government had therefore failed to establish the requisite ground or the basis of which it might be allowed to go back on its promise
The first submission of the learned counsel for the appellants must therefore fail
The next submission of learned counsel for the appellants was that the concessions granted by the said order dated 30th June 1969 were of no legal effect as there is no statutory provision under which such concessions could be granted and the order of 30th June 1969 was ultra vires and bad in law
We totally fail to see how an Assistant Commissioner or Deputy Commissioner of Sales Tax who are functionaries of a State can say that a concession granted by the State itself was beyond the powers of the State or how the State can say so either
Moreover if the said argument of learned counsel is correct the result would be that even the second order of 12th January 1977 would be equally invalid as it also grants concessions by way of refunds although in a more limited manner and that is not even the case of the appellants
Although we are of the view that the contention set out in the foregoing paragraph is not open to the appellants at all we propose to examine the merits of that contention because in our view even on merits the contention raised must be rejected
The ground on which it was submitted that the said order of 30th June 1969 was invalid is that there is no provision under the Karnataka Sales Tax Act 1957 referred to hereinafter as the said Act under which any refund could be granted
The learned counsel for the appellants pointed out that only relevant provision in this connection is Section 8A of the said Act and that Section empowers the State Government to notify exemp 951 tions and reductions in the levy of tax on sale or purchase of goods that are made exigible under the provisions contained in Chapter 3 of the said Act
Section 8A expressly empowers the State Government to grant exemptions and reductions
Under the said order dated 30th June 1969 it has been inter alia provided that a cash refund will be allowed on all sales tax paid by a new industry on raw materials purchased by it for the first five years from the date the industry goes into production as set out in said the Order
The only submission made on behalf of the appellants is that since the benefit given is called a refund it cannot be said to be an exemption or reduction as permitted by Section 8A
In our view there is no substance in this submission at all
In order to test the validity of the order dated 30th June 1969 one has to see the substance of the concession granted under the order and not merely certain words used out of context
Although the benefit regarding sales tax granted to the new industries is by way of refunds of sales tax paid to the extent provided in the Order it is clear that in effect the benefit granted is in the nature of an exemption from the payment of the sales tax or reduction in the sales tax liability to the extent stated in the order
In view of this there is no substance whatever in the contention that the State Government had no authority to provide for the grant of refunds
Again the mere fact that the order of 30th June 1969 did not specify the power under which it was issued will make no difference because such a power is clearly there in Section 8A and where the source of power under which it is issued is not stated in an order but can be found on the examination of the relevant Act the exercise of the power must be attributed to that source
The second submission of the learned counsel for the appellants must also therefore be rejected
Although at one stage a faint doubt was raised by learned counsel for the appellants as to whether the Doctrine of Promissory Estoppel could be regarded as good law now he conceded that doctrine must be regarded as good law in view of the recent decision of this Court in State of Bihar and Anr
vs Usha Martin Industries Ltd 1987 65 STC 430 where a Division Bench comprising three learned Judges of this Court upheld and applied that doctrine
In the result there is no merit in the appeals and they are dismissed with costs
SL Appeals dismissed


Summary:
These appeals were directed against the common judgment of the High Court in Writ applications filed by different petitioners challenging the termination of the mining leases granted to them
The State of Haryana which had executed the mining leases in favour of the writ petitioners for ten years under the provisions of the Mines  Minerals Regulation  Development Act the Act terminated the said leases prematurely in the purported exercise of powers under Section 4A of the Act without prior notice to the writ petitioners or any opportunity to them to defend their cases
The leases were so terminated on the ground that the Haryana Minerals limited a public sector undertaking had fully equipped itself to undertake the mining operations
The High Court allowed the writ petitions
The State of Haryana and Haryana Minerals Limited appealed to this Court by Special leave against the decision of the High Court
According to the appellant the necessary consultation between the Central Government and the State Government was held fulfilling the conditions under Section 4A of the Act and the decision impugned was taken
The appellant contended that the writ petitioners lessees had no locus standi to place their view point and it was not necessary to give them notice and that there was no violation of the principles of natural justice
Dismissing the appeals the Court  HELD The language of Section 4A indicates that the Section by itself does not permaturely terminate any mining lease
A decision in this regard has to be taken by the Central Government
The question of the State Government granting a fresh mining lease in favour of a 1016 Government Company or a Corporation arises only after the existing mining lease is terminated the section does not direct termination of all mining leases merely for the reason that a Government Company or a Corporation has equipped itself for the purpose
It is not correct to say that an existing mining lease can be terminated for the reason that a Government Company or a Corporation is ready to undertake the work
Viewed thus the section must be interpreted to imply that a person who may be affected by such a decision should be afforded an opportunity to prove that the proposed step would not advance the interest of mines and mineral development
Not to do so will be violative of the principles of natural justice
Since there is no suggestion in the section to deny the right of the affected persons to be heard the provisions have to be interpreted as implying to preserve such a right
A final decision to prematurely terminate a lease can be taken only after notice to the lessee1019C H1020E The Writ Petitioners respondents before the Court were never given an opportunity to be heard
If such an opportunity had been afforded they would have shown that their standard of mining operations was very high and favourably measured against the expected standard and was superior to that of the Haryana Minerals Limited
1021G There was no effective consultation between the Union of India and the State Government and the Central Government did not form any opinion as required under Section 4A of the Act
The respondents before the Court were entitled to be heard before a decision to prematurely terminate their leases was taken but they were not given any opportunity to place their cases
The respondents must succeed
1022A B Baldev Singh and others vs State of Himachal Pradesh and others  Union of India and another vs Cynamide India Ltd and another AIR 1987 SC 1802 D C Saxena vs State of Haryana AIR 1987 SC 1463 and State of Tamil Nadu vs Hind Stone etc
   referred to