7 Mgfj 2w L éw‘hi ,i “W EN Ti-EE. F€€E§’§i§ i’§§%§% €GEFR? @F £§§ E§§”§”E§§E C§E§§§?’?SE§§§H, £T li$§§é§R Wrié Petition m No‘ 4w} of 2908 Petioners: ti /(1 ) M/s VM Extrusions Pvt. Ltd, ‘A company incorporated under The Companies Act, 1956 having its registered office at 0—4/27, Udaya Nagar, Tatibandh, Raipur (C.G.) having works at Gondwara, Bir Gaon, Raipur, (C.G.) through its Managing Director, Mr. Thomas Georg, slo late Shri E.D. Varkey, r/o C-4/27, Udaya Nagar, Tatibandh, Raipur (C.G.) . Mr. Thomas George S/o Late Shri E.D. Varkey, aged about 42 years R/o C—4/27, Udaya Nagar, Tatibandh, Raipur (C.G.) Managing Director, MIS‘ V.M Extrusions Pvt. Ltd (2) Respondents: State of Chhattisgarh, through Secretary, Commerce and industries Dept.,-D.K.S.Mantraiaya Bhawan, Raipur, Chhattisgarh. General Manager, District Trade and industry‘Centre, Govt. of Chhattiarh, Raipur. e . sg é @ (3) Commissioner of Commercia! . U9 Tax, Chhattisgarh Vanijyik'Kar Bhavan, Civil Lines, Raipur (C.G.) Before : Han'his Ehe Chief JuSiiCe_§L1 the lwiori’his High gsurt 0f Judicature Chhattis arh at Bilas ur. r Articles 226 of the Constitution of lndia for directions, orders or wriis‘ including writs d his csmganion iudges of Egtil‘ion undo issuance of suitable min themna'mire u of mandamus ”W certiorari em .. HIGH COURT OF CHHATTISGARH : BILASPUR NINDRA MOHAN SHRIVASTAVA J. LE SHRI M SINGLE BENCH: HO’ Writ Petition 1T) NO.6057I2008 M/s V. M. Extrusions Pvt. Ltd, and another Versus State of Chhattisgarh and Others Petitioners Respondents i J3 FOR PRONOUNCEMENT OF ORDER ON Z5 MARCH, 2011 Sdl- Manindra Mohan Shrivastava Judge ,‘\ N B A W" HIGH COURT OF CHHATTISGARH : BILASPUR §ingle Bench: Hon’ble Shri Manindra Mohan Shrivastavai Writ Petition (T) NO.6057/2008 ’(Writ Petition under Article 226 of the Constitution of India) Present:- Shri Neelabh Dubey, counsel for the petitioners. Shri V. V. S. Murthy, Deputy Advocate General for the State. ORDER (Pronounced on &-03-201 1) By this petition under Article 226 of the Constitution of lndia, the petitioner, a Private Limited Company, assails correctness and validity of the decision taken by the State; Level Commercial Tax Exemption Committee in its 20"” Meeting dated 20/21-10-2005 rejecting petitioner’s claim for grant of exemption from payment of entry tax communicated to the petitioner vide communication dated 17—1 1—2005 (Annexure P-6). The petitioner has also assailed legality and validity of assessment order dated 26-12—2007 (Annexure P-9) and consequent demand notice dated 26—04-2008 (Annexure P—tO) issued by the Assistant Commissioner, Sales Tax whereby and whereunder a demand of Rs.6,87,101/— has been raised against the petitioner towards stated liability of payment of entry tax. 2. The factual matrix giving rise to the instant petition, relevant and necessary for adjudication of controversy involved in the petition, are that the petitioner, a private limited company, intended to establish a manufacturing unit for manufacturing H.D.P.E./P.P. woven bags..At the relevant time, the State promulgated its industrial policy for the period 2001-2006 (Annexure P~4). According to the petitioner, the industrial policy declared that the industries included in the thrust sector would be given various incentives and the policy also t3 Petitioners M/s V. M. Extrusions Pvt. another Resgondents Versus declared that the government would be granting exemption from payment of entry tax to all the industries including large and medium scale industries. The petitioner relying upon the industrial policy of the State, wherein several incentives including exemption from payment of entry tax were assured and promised, proceeded to establish a manufacturing unit. Though in the policy, it was clearly urged that all concerned departments and institutions shall issue follow-up notifications to giVe effect to all the provisions of the policy within a period of sixty days of the policy, the follow-up action was not taken according to the promise held out and representation made in the authentic documents of the State industrial policy for the period 2001—2006. The petitioner acting upon the representation made by the-State commenced its commercial production on 16- 06-2004 in the solemn hope and legitimate expectation. However, a new industrial policy for the period 2004-2009 was issued vide notification dated 01- 09—2005(Annexure P—7), in implementation of the new industrial policy of the year 2004—2009 granting exemption from payment of entry tax in respect of various industries including those products which are manufactured by the petitioner but the notification, resiling from the promise earlier made, extended the benefit of exemption from payment of entry tax only to those industries which commenced their commercial production on or after 01—1 1-2004. \‘7/ 3. lt is the case of the petitioner that the petitioner acted on the industrial policy of 2001-2006 and based his business calculation relating to investment and procurem‘ent of loan etc. on such a promise and representation made by the government in the industrial policy, which included, amongst other, exemption from payment of entry tax. lt is also the case of the petitionerthat he established his manufacturing unit and brought the business in compliance with the conditions making it eligible for exemption from payment of entry tax. 4. Vide notification dated 26-04-2002 (Annexure P—4), the industries, \ manufacturing HDPE/PP woven bags, were categorized as thrust sector and therefore, the petitioner, it is pleaded, was entifled to various incentives, particularly, the entry tax exemption during the currency of the declared period of the industrial policy from 2001-2006. As the petitioner set up his industrial unit after the date of enforcement of industrial policy and commenced commercial , production during the period of coverage of the industrial policy of 2001-2006, the respondents were duty bound to act fairly and equitably and fulfill their promise of granting exemption from payment of entry tax. 5. An application dated 01—10-2004 (Annexure P-5) for grant of exemption from payment of entry tax was submitted before the General Manager, District Trade & industries Centre, Government of Chhattisgarh, Raipur. The said application was, however, rejected by the State Level Committee and communicated to the petitioner vide letter dated 17-11-2005 (Annexure P—6). In the said letter, it was stated that the State level Committee in its 20‘“ Meeting held on 20/21-10—2005, Considered the petitioner’s case for grant of exemption and the Committee found that, though, in the industrial policy of 2001—2006, it was provided that exemption of entry tax would be extended, but the government did not issue any notification. ln the notification dated 06-10-1994, which was issued and in force even prior to industrial policy of 2001—2006, enlisted HDPE/PP Woven Bags as ineligible industry. As the petitioner commenced commercial production on 16—06-2004, and the exemptiOn from payment of entry tax under industrial policy 2004-2009 is applicable only in respect of those, who commenced their commercial production on or after 01-1 1-2004, the petitioner’s unit was held not entitled to exemption from payment of entry tax. Even before such rejection by the State Level Committee, the petitionerhad also made a representation to the Principal Secretary, Department of Commerce and Industries of the State of Chhattisgarh requesting to consider his case and allow . exemption. According to the petitioner, other manufacturers of HDPE/PP Woven Bags are manufacturing goods at more competitive prices than the petitioner as ‘ »/4 their cost of production is very low because of incentives and benefits availabie to them. Since the exemption claimed by the petitioner was rejected by the State level Committee in year 2005, in the assessment order dated 26-12—2007 (Annexure P-9), the petitioner was also assessed as liable for payment of entry tax of Rs.6,87,101/-, which was followed by a demand notice Annexure P-10 issued by the Assistant Commissioner, Sales Tax requiring the petitioner to pay the assessed entry tax. 6. The sole ground to challenge the rejection of petitioner’s claim for exemption from payment of entry tax, assessment and also demand of entry tax is that the State Government, having made a clear and unequivocal representation in its authentic document of industrial policy for the period 2001- 2006 that it would be providing benefit of entry tax exemption to all industries including various incentives to thrust sector industries, was bound by principles of promissory estoppel and fulfill his promise. The action of the Taxation Authorities to hold the petitioner liable for payment of entry tax and raising of demand is an act of resiling from the representation and promise made by the State Government through its industrial policy. 7. Learned counsel for the petitioner submitted that it was the State policy declaring various incentives including exemption from payment of entry tax that the petitioner proceeded to establish a manufacturing unit. Learned counsel for the petitio‘ner further contended that the petitioner as a prudent businessman assessed viability of its industrial venture by acting upon the solemn representation made by the State that he would be granted various incentives, and patticularly, would be exempted from payment of entry tax and acting on that representation altered its position. The petitioner commenced commercial production on 16-06-2004, which was well within the declared period of industrial policy of 2001-2006, and he was entitled to exemption from payment of entry tax, hotwithstanding that notification of exemption as statutorily required under Section 10 of the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (In short “the Adhiniyam of 1976”), was not issued till the date of commencement of production. Learned counsel for the petitioner further contended with vehemence that the action of the State in refusing to grant exemption from payment of entry tax against his own representation was highly unfair and inequitable. He sought to demonstrate by submitting that the new industrial policy for the period 2004-2009 was promulgated by the State wherein ‘ the State again held out promise for grant of entry tax exemption and‘ in furtherance thereof, a notification was issued on 01-09-2005. In that notification, exemption was granted in respect of the industry set—up by the petitioner; but the benefit of exemption from payment of entry tax was extended only in respect of those industries which commenced their production on or after 01-11-2004. This according to learned counsel for the petitioner was highly unfair and violated doctrine of promissory eStoppel. ln support of his contention, learned counsel for the petitioner placed heavy reliance on the decision of the Supreme Court in the case of State of Punjab vs. Nestle India Limited‘and another, (2004)6 SCC 465 and another decision rendered by the Gauhati High Court in the case of Shree Sanyeeji [spat Pvt. Ltd. and Another vs. State of Assam and Others, [20061147 src 146 (Gauhati). 8. Per contra, learned State counsel advanced submissions to support the decision of the State Level Committee reiectingpetitioner’s claim for exemption from payment of entry tax. He urged that even though, the industrial policy of 2001-2006 declared certain incentives, but did not represent nor promised that exemption from payment of entry tax will be extended to all industries, so, such promise could not be acted upon nor the petitioner had any reason to act upon such representation unless a notification granting exemption was issued in exercise of statutory powers conferred under Section '10 of the Adhiniyam of ' 1976. Learned State counsel referred to the erovisions contained in the Adhiniyam of 1976 to submit that no one is entitled to any exemption unless appropriate notification, as envisaged under Section 10 of the Adhiniyam of 1976 is issued by the State Government. His further submission is that as on the date when the industrial policy of 2001-2006 was promulgated, a statutory notification dated 06-10—1994 was holding the field, under which, no exemption was available for the category of petitioner’s industrial unit of manufacturing HDPE/PP Woven Bags, as it was included in the list of ineligible industries. lt is further submitted that the State issued a notification in the matter of payment of entry tax in exercise of its power conferred under Section 10 of the Adhiniyam of 1976 on 01—09-2005 and in implementation of its new industrial policy of 2004—2009 and though the HDPE/PP Woven Bags manufacturing units were included for the purpose of grantiof exemption from payment of entry tax, the benefit extended x only to those industries, which commenced their production on or after 01-11—2004, therefore, till the notification dated 06-10—1994 held the field, the petitioner’s unit was not entitled to exemption from payment of entry tax and when that was replaced by another notification of 01-09—2005, the benefit was extended with reference to the date of commencement of production. Thus, the petitioner was not entitled» to any exemption from payment of entry tax under both the notifications. Learned State counsel further contended that a mere representation of granting certain incentives under industrial policy of 2001-2006 could not be enforced against the provisions of statute and statutory notifications as that would amount to enforcing promise prohibited under the law. He further submitted that on the date of rejection of petitioner‘s claim by State level Committee, new notification dated 01-09-2005 had come into existence and under Clause—14 of Annexure~ll of the Adhiniyam of 1976, the petitioner had a remedy of filing an appeal before the State Appellate Forum, in case, he was aggrieved by the decision of the State Level Committee. He also submitted that similar provisions of appeal existed under the earlier exemption notification dated 06-10-1994. 9. It is not in dispute that the petitioner established its manufacturing unit for manufacturing HDPE/PP Woven Bags, after promulgation of State’s Industrial Policy of 2001-2006. The categoric assertion made by the petitioner in that regard has not been disputed by the respondents in their return. Therefore, the petitioner‘s assertion that he commenced its commercial production on 16-06- 2004 is an admitted position on record as the respondents themselves in their return have emphatically stated that the petitioner had commenced commercial production on that date. 10. In order to decide the controversy as to whether the petitioner is entitled to exemption from payment of entry tax by application of the doctrine of promissory estoppel is required to be considered in the light of the industrial policy of 2001- 2006 issued by the State Government, statutory scheme of grant .of exemption ’ from payment of entry tax under the Adhiniyam of 1976 and, statutory exemption notification issued by the State Government on 06-10—1994 and 01-09—1995. However, before l proceed to deal with the claim of the petitioner, it is apposite to deal with the subject of promissory estoppel and development of law in that regard. 11. In the case of State of Punjab (supra), the Supreme Court considered the development of law with regard to application of principles of promissory estoppel in great detail, referring to large number of decisions rendered by it on the subject . including one of the earliest decision in the case of Collector of Bombay v. Municipal Corpn. of the City of Bombay, AIR 1951 SC 469, which laid the foundation of doctrine of promissory estoppel. It was held:- “25. In other words, promissory estoppel long recognised as a legitimate defence in equity was held to found a cause of action against the Government, even when, and this needs to be emphasised, the representation sought to be enforced was legally invalid in the sense that it was made in a manner which 7v? was not in conformity with the procedure preécrikied by statute. “ 12. Subsequent decision in the case of Union of India v. Anglo Afghan Agencies, AIR 1968 SC 718, was also relied upon, thus: “26. This principle was built upon in Union of India v. Anglo Afghan AgenciesZ where it was said (SCR at p.385): (AIR p.728, para 23) “23. 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. “ 13. The Supreme Court, in its aforesaid decision, relied upon its earlier landmark decision in the case of Motilal Padampat Sugar Mills’ Co. Ltd. V. State of U.P., (1979) 2 SCC 409, noting the pre—conditions, strengths and limitations outlined in that decisions as below:- “28. This Court rejected all the three pleas of the Government. It reiterated the well-known preconditions for the operation of the doctrine: (1) a clear and unequivocal promise knowing and intending that it would be acted upon by the promisee; (2) such acting upon the promise by the promisee so that it would be inequitable to allow the promisor to go back on the promise. x 29. As for its strengths it was said: that the doctrine was not limited only to cases where there was some contractual relationship or other pre-existing legal relationship between the parties. The principle would be applied even when the promise is intended to create legal relations or affect a legal relationship which would arise in future. The Government was held to be equally susceptible to the operation of the doctrine in whatever area or field the promise is made -—— contractual, administrative or statutory. To put it in the words of the Court: Igé “The 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. (SCC p.442, para 24) * [E]quity will, in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights, even where they arise, not under any contract, but on his own title deeds or under statute. (SCC p. 425, para 8) * * ~k Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel §4T5and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry Out the promise made by it." (SCC p.453,para 33) (emphasis added) 30. So much for the strengths. Then come the limitations. These are: (1) Since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. \But it 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. (SCC p.443, para 24) (2) No representation can be enforced which is prohibited by law in the sense that the person or authority making the representation or promise must have the power to carry out 10 the promise. If the power is there, then subject to the preconditions and limitations noted earlier, it must be exercised. Thus, if the statute does not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute. But if the statute confers power on the Government to grant the exemption, the Government can legitimately be held bound by its promise to exempt the promisee from payment of sales tax. (SCC p.453) “ 14. The Supreme Court further held that the aberrant note struck by its earlier decisions in the case of Jit Ram Shiv Kumar v. State of Haryana, (1981) 1 SCC 11 was formally disapproved by a Bench of three Judges in Union oflndia and Others versus Godfrey Philips India Ltd., (1985)4 SCC 369. The limitations to the doctrine of promissory estoppel delineated in the case of Motilal Padampat Sugar Mills (supra), re-affirmed in the case of Union of India and Others(supra), were also dealt with in para-36 extracted below:- “36. The limitations to the doctrine delineated in Motilal Padampat Sugar Mil/s3 however, were also reaffirmed when it was said: (SCC pp.387-88, para 13) “[T]hat there can be no promissory estoppel against the legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a repreSentation or promise which is contrary to law or which was outside the tauthority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority."(emphasis added)“ 11 \W‘ 15, The Supreme Court also considered legal pbsition in the case of Baku! Cashew Co. v. STO, (1986) 2 SCC 365 in following words:- “38. The decision in Baku] Cashew Co. v. STOZ was a case dealing with the preconditions on the fulfilment of which a plea of promissory estoppel can be raised viz. that the representation must not only be definite but must be satisfactorily established. The alteration of the petitioner’s pdsition acting upon such representation must also be pleaded with particularity and sufficiently supported with material. The Court found that it had not been established that any prejudice had been suffered by the petitioner, As we have noted earlier, each of the respondents in these appeals has given a detailed account of how the monies ‘x \ which were otherwise payable on account of purchase tax have been expended on the milk-shed areas and producers of milk. No dispute has been raised by the appellants to this.“ 16. The decision rendered by it in the case of Kasinka Trading v. Union of India, (1995) 1 SCC 274 and Amrit Banaspati Co. Ltd. V. State of Punjab,, (1992)2 SCC 411 were also considered. Although, the view expressed in Jit Ram Shiv Kumar’s case (supra) has been disapproved in Union of India and Others versus Godfrey Philips India Ltd.,(supra), it was ostensibly resuscitated in I.T.C. Bhadrachalam Paperboards v. Manda] Revenue Officer, A.P., (1996)6 SCC 634, the Supreme Court reiterated the legal position laid down in earlier decisions in para 43, 44, 45 and 46 of its decision, which are reproduced as below:- “43. lt would appear that these observations are in conflict with the earlier and subsequent pronouncements of the law on promissory estoppel. Chandrasekhara Aiyar, J. had held that the representation was enforceable despite the “accident” that the grant was invalid inasmuch as it was contrary to statute. Motilal Padampat Sugar Mil/s3 had said that the promise was enforceable against the Government despite the requirement of Article 299 of the Constitution. Similarly, Century Spg.4 held that 12 Then again in GO to be granted o dfrey Phi/$36 the Court directed an estoppel even though n the Rule basis of the principles of exempticn 8 of the’Central E promissory required exemption to be granted by noti xcise Rules, 1944 fication. 13 have noted earlier, the statutory provisions required exemption to be granted by notification. Nevertheless, the Court having found that the essential prerequisites for the operation of promissory estoppel had been established, directed the issuance of the exemption notification." 17. The legal position with regard to invocation of the doctrine of promissory estoppel has been