Civil Writ Petition No. 11651 of 1989 1 In the High Court of Punjab & Haryana at Chandigarh Civil Writ Petition No. 11651 of 1989 Date of decision : 01.9.2008 HMT Limited ..... Petitioner vs Notified Area Committee, SAS Nagar (Mohali) and others ..... Respondents Coram: Hon'ble Mr. Justice Rajesh Bindal Present: Mr. R. K. Chhibbar, Senior Advocate with Mr. Simarjit S. Chahal, Advocate, for the petitioner. Mr. Vijay K. Chaudhary, Assistant Advocate General, Punjab, for the respondents. Rajesh Bindal J. Prayer in the present writ petition is for issuance of an appropriate writ directing the respondents not to charge octroi duty from the petitioner and also further directing them to refund the octroi which was recovered from it. The petitioner is a public limited company. It had set up one of its unit at Pinjore in the year 1962. The Department of Industries, Government of Punjab, notified “Punjab Industrial Incentives Code under the Industrial Policy Statement, 1978” (hereinafter to be referred as, 'the Code') for the grant of incentives under the Industrial Policy Statement, 1978 (for short, 'the Policy'), on 21.3.1979. Keeping in view various benefits under the policy, especially the exemption/ refund of octroi duty, the petitioner-company decided to set up a unit at Mohali and in furtherance to the decision, a unit was set up in October 1984. The raw-material for manufacture of tractors at the unit set up at Mohali was either received from Pinjore factory or purchased either from Panchkula, Chandigarh or any other place as per the requirements. In terms of Clause 7 of the Code, the petitioner was entitled to exemption/refund of octroi for a period of six years as falling in Group-II. Civil Writ Petition No. 11651 of 1989 2 As per the procedure laid down in the Code, the petitioner paid the octroi duty at the check-post and applied for the refund thereof along with requisite documents to the competent authority. From July 1984 till March 1985, the amount was verified and refunded to the petitioner. However, subsequently the respondents did not refund the octroi duty paid by the petitioner inspite of the claim made by the petitioner on statutory form submitted along with the requisite documents. Under the circumstances the petitioner had filed Civil Writ Petition No. 6180 of 1986. During the pendency thereof, the claim made by the petitioner was accepted by the respondents. Writ petition was dismissed as withdrawn. Refund of octroi duty paid for the period upto December 1987 was granted to the petitioner. Thereafter, the petitioner filed application for refund of octroi duty paid for the period from January 1988 onwards. Respondent no. 2 asked the petitioner to furnish certain documents, which were furnished. In fact, the requirements as were informed by respondent no. 2 was of the documents primarily which were already in their possession namely, copy of the industrial licence, memorandum and articles of association of the company, copy of the resolution authorising the person to sign the documents for refund, the details of the grant of claim, refund already received and pending and further that the certificate issued by the Chartered Accountant was not as per the language contained in Clause 7.2 (1) (b) of the Code. Respondent no. 2 also pointed out in the communication that the Accountant General had raised audit objection on the octroi refund admissible to the petitioner company. Inspite of submission of all the requisite documents and even after clearance of the objections raised by respondent no. 2, the refund was still not granted. Vide memo dated 31.5.1988 respondent no. 2 communicated to the petitioner about the audit objection stating therein that the item used by the petitioner for assembling tractors were final products/goods and did not qualify as raw-material and as such the refund was not admissible. The letter was responded vide communication dated 9.6.1988 stating therein that the goods/material used by the petitioner-company for manufacture of tractors at Mohali plant were raw-material for the purpose of manufacture of tractors. Even as per the Central Excise Act, 1944, the petitioner is entitled Civil Writ Petition No. 11651 of 1989 3 to modvat credit on these products which are used in the manufacture of tractors. Thereafter also, number of letters were exchanged between the parties but without any result. It is in this factual matrix that the petitioner is before this court praying for a direction to the respondents to grant the benefit of exemption/refund of octroi duty as per the Policy. Learned counsel for the petitioner submitted that the petitioner in the present case is entitled to exemption/refund of octroi duty paid on the raw-material used in the manufacture of tractors at the Mohali plant in terms of Clause 7 of the Code framed under the Policy. The unit was set up keeping in view the incentives offered by the respondents. The petitioner was initially denied the benefit, however, when it approached this court in Civil Writ Petition No. 6180 of 1986, the claim was accepted by the respondents and a sum of Rs. 8,72,925.05 paise for the period from April 1985 to December 1987 initially claimed by the respondents was refunded. From January 1988, again the respondents stopped refunding the octroi paid by the petitioner. He submitted that the action is totally arbitrary. Once the respondents had admitted the claim of the petitioner initially by grant of octroi refund themselves and later on when the petitioner approached this court, the respondents accepted the claim by settling the matter and it was too late in the day for them to refuse the refund more than three years after the setting up of the unit inspite of the fact that the petitioner fulfilled all the conditions. Audit objection was only a farce for denying the legitimate claim to the petitioner. Besides this, the submission is that the denial of exemption/refund to the petitioner-company is violative of principle of promissory estoppel. Reliance has been placed upon The Union of India and others vs M/s Anglo Afghan Agencies etc. AIR 1968 SC 718 and Tata Cellular vs Union of India (1994) 6 SCC 651. Learned counsel for the respondents submitted that the petitioner could not be granted the benefit of exemption/refund of octroi duty as it is not eligible for the same as no manufacturing work was being carried out at Mohali. The petitioner was not bringing raw-material as is the requirements as per the Code and accordingly the claim made by the petitioner is not admissible. He further submitted that the audit objection raised by the Accountant General had still not been finalised and in the absence thereof the benefit could not be granted to the petitioner. It is Civil Writ Petition No. 11651 of 1989 4 admitted that the refund claimed upto December 1987 had been granted to the petitioner whereas for the period subsequent thereto was pending. It is stated that as per the Code, the petitioner was not entitled to exemption/refund of octroi. Refund of octroi counted from the date of issue of registration certificate or from the date of production or from the date of availing this incentive for the first time, whichever is earlier and as the certificate of registration of the petitioner is stated to be of 22.6.1979, the period is already over and now no claim as such can be made. It is further submitted that Civil Writ Petition No. 6180 of 1986 filed by the petitioner was dismissed on 23.1.1987. Heard learned counsel for the parties and perused the paper book. To appreciate the controversy in the present case, it would be appropriate to refer to the provisions of Clause 7 of the Code. The same reads as under:- “7. Exemption/Refund of Octroi/Terminal Tax. 7.1. (1) Exemption from the levy of octroi/ terminal tax or alternatively the refund of the amount paid by a unit shall be allowed for a period of 5 years, 6 years, 8 years and 10 years for area groups I, II, III and IV respectively in which the unit is located and shall be allowed from the date of issue of registration certificate or from the date of availing this incentive for the first time or from the date of going into production. 7.1 (2) Exemption shall be allowed on building materials, plant and machinery, raw materials consumed in the premises of the unit. 7.2. Procedure. Form 'F' 7.2. (1) Application in form 'F' accompanied by the following documents for refund shall be made to the District Officer :- (a) Original receipts or attested copies thereof, -- vide which octroi/ terminal tax has been paid. (b) Certificate by a chartered accountant to the Civil Writ Petition No. 11651 of 1989 5 effect that the raw materials for which octroi has been paid have actually been accounted for in the books of the unit and have been actually consumed for the production of end product. 7.2. (2) The application for refund shall be made to the District Officer on quarterly, half yearly or yearly. The claim exceeding one financial year shall not be entertained at a time. 7.2. (3) The District Officer shall sanction the payment of refund against such claims.” A perusal of the provisions of the Code as reproduced above shows that exemption from levy of octroi/terminal tax or alternatively the refund of the amount paid by a unit is allowed for a specified period to the unit setup in different areas. The same is admissible either from the date of registration of certificate or from the date of availing of incentives for the first time or from the date of going on production. It is not mentioned in the rules that it could be either from the dates whichever occur first. Rather the language suggest that it would be from the date when the person started claiming the benefit. The exemption is admissible on building material, plant and machinery, raw-material consumed in the premises of the unit. For the purpose of refund, an application in Form-F along with original receipts or attested copies thereof showing payment of octroi duty and a certificate from the Chartered Accountant to the effect that the raw-material at which the octroi had been paid has been entered in the books of accounts and had actually been used in the production was to be annexed. A District Officer was authorised to grant refund of such claims. It is the admitted case of the parties that for the period from July 1984 to March 1985, the petitioner submitted the claim for refund of octroi duty which was granted from time to time. When the claim for refund was not granted for the period from December 1985 onwards, the petitioner filed Civil Writ Petition No. 6180 of 1986 in this court. Though the petitioner states that during the pendency of the writ petition the dispute was settled between the parties and accordingly the petitioner was granted the Civil Writ Petition No. 11651 of 1989 6 refund of the octroi duty paid for the period from April 1984 to December 1987 but the stand of the respondents is that writ petition was dismissed on 23.1.1987. However, it cannot be concluded that the writ petition filed by the petitioner was dismissed, for the simple reason that at the time of filing of writ petition the claim of the petitioner for refund of octroi duty was pending from April 1985 to December 1987. According to the respondents, the writ petition was dismissed on 23.1.1987 whereas it is the admitted case of the parties that even for the period thereafter i.e. upto December 1987 the petitioner was, in fact, granted refund of the octroi duty paid. Had the writ petition been dismissed, there was no question of grant of refund of octroi duty paid for any period subsequent thereto or even for the period involved in the writ petition. The fact that initially as well as after the filing of the writ petition in this court, the petitioner had been granted the benefit of refund of octroi duty paid by it clearly establishes that the unit of the petitioner was considered to be eligible unit for the purpose of admissibility of the benefits as per the policy and the Code. It is also evident that the petitioner had completed all the formalities required for the purpose. Even otherwise this fact is not disputed in the written statement filed by the respondents that the petitioner was not making compliance of any of the formalities required for grant of benefit to it. The only reason as emerges from the pleadings of the parties to deny the benefit of exemption/refund of octroi duty to the petitioner company is the audit objection raised by the AG office stating therein that the goods/material brought by the petitioner at Mohali plant for the purpose of manufacture of tractors are not raw-material but were final products and accordingly the petitioner is not covered under the terms of the policy and the Code. Even this objection raised by the Audit party is not sustainable in the eyes of law. In the process of manufacture of final product it is not always that a unit manufactures all the components required therefor in its unit. Number of them are out sourced. The components or parts which are out sourced to enable such a manufacturer to bring a new product in existence in many cases would be final product for the other units. But that will not loose the character of its being a raw-material for the purpose of Civil Writ Petition No. 11651 of 1989 7 unit who by using that product brings into existence a new marketable commodity. As is evident in the facts of the present case, the petitioner- company was out sourcing various products like- Engine, Tyres, Batteries etc. which may independently be final products as such but still if we consider their use in the manufacture of tractors, the same will remain a raw-material. Even on the issue of promissory estoppel, legitimate expectation also. There is merit in the writ petition. The promise by the State Government is in unequivocal terms in the form of the Policy, in terms of which the Code was notified which provides for grant of various benefits to the industrial units set up in the State. Midstream the respondents could not be permitted to back out therefrom to the disadvantage of the petitioner. Reference can be made to Mahabir Vegetable Oils (P) Limited and another vs State of Haryana and others (2006) 3 Supreme Court Cases 620, MRF Ltd., Kottayam vs Assistant Commissioner (Assessment) Sales Tax and others (2006) 8 Supreme Court Cases 702, A.P. Steel Re-rolling Mill Ltd. Vs State of Kerala and others (2007) 2 Supreme Court Cases 725, and Southern Petrochemical Industries Co. Ltd. Vs Electricity Inspector & Etio and others (2007) 5 Supreme Court Cases 447. For the reasons mentioned above, the writ petition is allowed. The action of the respondents in denying the exemption/refund of octroi duty paid by the petitioner is held to be illegal. Amount refundable to the petitioner be paid within 3 months from the date of receipt of the copy of the judgment. 01.9.2008 (Rajesh Bindal) vs Judge