C. W. P. No. 14236 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Case No. : C. W. P. No. 14236 of 2008 Date of Decision : December 09, 2008. M/s Mahabir Vegetable Oils Pvt. Ltd., Karnal .... Petitioner Vs. State of Haryana and others .... Respondents CORAM : HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE L. N. MITTAL * * * Present : Mr. Ashok Aggarwal, Senior Advocate with Mr. Avnish Jhingan, Advocate for the petitioner. Mr. Sanjeev Kaushik, Addl. A. G., Haryana. * * * ADARSH KUMAR GOEL, J. (Oral) : 1. This petition seeks quashing of order dated 26.09.2007 passed by the Lower Level Screening Committee (LLSC), constituted under the provisions of Rule 28-A of the Haryana General Sales Tax Rules, 1975(for short, “the Rules), as affirmed by Higher Level Screening Committee (HLSC) vide order dated 04.07.2008. 2. Case of the petitioner is that it is a Company under the Companies Act, 1956. The State of Haryana declared its Industrial Policy and framed Rule 28-A of the Rules, which inter alia, provides for exemption from sales tax to the extent of specified quantum on conditions specified C. W. P. No. 14236 of 2008 2 therein. The operative period mentioned in the Rules is from 01.04.1988 to July 1997. 3. The petitioner was making investment prior to 1996. One of the conditions of eligibility is that the product to be manufactured should not to be in the negative list i.e. should not be in Schedule III appended to the Rules. On 16.12.1996, notification was issued including the solvent extraction plant in negative list and on that basis, the petitioner was sought to be declared ineligible on the ground that eligibility is to be seen on the date of commencement of commercial production or on the date of application. The date of application and commercial production in the case of the petitioner is in the year 1997. The petitioner filed writ petition in this Court, which was dismissed and thereafter filed C.A. No. 1635 of 2006 in the Hon'ble Supreme Court, which was allowed vide order dated 10.03.2006 (The judgment is reported in 2006 (3) SCC 620). The Hon'ble Supreme Court held that on the day the petitioner started making investment, Rule 28-A was operative. The said rule amounted to representation, on which the petitioner acted. The relevant observations are as under :- “The promises/representations 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 they have 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 C. W. P. No. 14236 of 2008 3 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 the 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 maini act. 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 C. W. P. No. 14236 of 2008 4 clearly in the terms of the Act, or arises by necessary and distinct implication. [See West v. Gwynne, (1911) 2 Ch. 1]. A retrospective effect to an amendment by way of a delegated legislation could be given, thus, only after coming into force of sub- section (2A) of Section 64 of the Act and nor 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.” 4. With the above observations, the matter was remanded to the Director of Industries, to consider it afresh. 5. After considering the matter, the impugned order was passed. Therein, recommendation was made 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 has been calculated with reference to the investment made by the petitioner up to 16.12.1996. 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 C. W. P. No. 14236 of 2008 5 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 prospective.” 6. We have heard learned counsel for the parties and perused the record. 7. Learned counsel for the petitioner submitted that the petitioner could not be deprived of the benefit of the entire investment. Either the petitioner was eligible under the Rules or the petitioner was not eligible. Once the petitioner was considered to be eligible inspite of notification dated 16.12.1996 putting the product in the negative list, benefit could not be restricted. 8. Learned counsel for the State submitted that though the petitioner was eligible under the Policy, eligibility was confined till the date the product was put in the negative list. In absence of any challenge to the notification dated 16.12.996, restricting the eligibility of the petitioner up to 16.12.1996 cannot be interfered with. 9. The question for consideration is, whether the petitioner having been treated to be eligible, could be denied the benefit of investment after the date of unit having been put in the negative list. 10. Rule 28-A i.e. Sub-rule 2 (f) of Rule 28-A is reproduced below :- “(f) `eligible industrial unit' means :- (i) a New Industrial Unit or expansion or diversification of the existing unit, which - C. W. P. No. 14236 of 2008 6 (I) has obtained certificate of registration under the Act; (II) is not a public sector undertaking where the Central Government held 51% or more shares; (III) is not availing incentive of interest free loan from the Industries Department for investment after the Ist day of April, [1988] (IV) [is not included in Schedule III appended to these rules] [(V) is not availing or has availed incentive of exemption under section 13 of the Act]” 11. Sub-rule 4(a) deals with date of eligibility, which is as under :- “(4) (a) Subject to other provisions of this rule, the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate, as the case may be to the extent, for the period, from year to year in various zones [from the date of commercial production or from the date of issue of entitlement/exemption certificate as may be opted].......” 12. Thus, the eligibility is from the date of commercial production or from the date of issue of entitlement/exemption certificate. 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 C. W. P. No. 14236 of 2008 7 investment before the said date. 14. 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. 14. 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. 15. The Appellate Authority may now pass a fresh order in accordance with law, within four months from the date of certified copy of this order. (ADARSH KUMAR GOEL) JUDGE December 09, 2008 ( L. N. MITTAL ) monika JUDGE