Case: Gitesh Pipes Private Limited & Another Vs. The State of Maharashtra & Others

P.R. Borkar, J.1. Heard Mr. P.M. Shah, learned Senior Counsel holding for Mr. R.R. Mantri, advocate for the petitioner and Mr. K.G. Patil, learned A.G.P. for the respondents.2. The petitioner challenges the Government Circular dated 23.3.2000 which provides 31.12.2000 as cut off date and seeks its quashing and setting aside with further direction that the respondents should grant the Sales Tax Incentive under package scheme of 1993 to the petitioner Company and to further restrain the respondents from recovering any sales tax from the petitioners.3. Petitioner no. 1 is a Company duly incorporated under the provisions of the Companies Act, 1956 as a Private Limited Company. Petitioner no. 2 is its Director having authority to sign and act on its behalf. It is case of the petitioners that in order to achieve dispersal of industries out of Mumbai,Thane, Pune belt and to attract them in the under-developed and developing areas of the State, respondent no. 1 offered packages of incentives to new units and for expansion of existing units in the specified region of the State.The original package of 1964 came to be amended from time to time and ultimately in the year 1993 a new package of incentives scheme was introduced by respondent no. 1. Under the said scheme, various regions were identified for grant of various types of incentives. Jalgaon city and district has also been included in it. 4. Petitioner no.1 is a small-scale industry engaged in manufacture of PVC pipes and fittings situated at M.I.D.C. area Jalgaon. The above said package scheme was implemented in Jalgaon district through respondent no.3. Besides other benefits under the scheme, sales tax exemption and other benefits including special capital incentives are conferred upon the specified industries in which the petitioner Company is included. The term S.C.I. benefits or incentives mean special capital incentives including exemption and refund of octroi, etc. The term S.T.I. incentives means exemption from sales tax, etc. upto 120 per cent of fixed investment of the unit. In this case, there is no dispute regarding eligibility of the petitioner for S.C.I. benefits or incentives. The dispute is only in respect of S.T.I. incentives and eligibility of the petitioner Company for them.5. It is case of the petitioners that earlier the petitioner Company was styled as, "M/s Shri Pulp and Paper" and had obtained Plot No. V-12 from the M.I.D.C., Jalgaon. At that time, petitioner Company was not registered. The matter was being processed. The petitioners desired to have the benefit of the scheme. On 28.3.2000, an application for letter of intent for eligibility for incentives was forwarded to respondent no. 3. After processing the same, a letter of intent is issued by respondent no. 3 - District Industries Centre. The date by which the particular unit has to start functioning and actual production is also fixed by respondent no. 3 in advance. The unit is expected to take effective steps by such date to get benefits of package scheme. After testing the eligibility of the petitioner on 30.12.2000 respondent no. 3 issued the letter of intent directing that if effective steps are not taken by 31.3.2002 to install and start production, the benefit of package scheme of 1993 shall not be given to the petitioners and the letter of intent shall be rendered invalid. Petitioner no. 1 - Private Limited Company was registered by present name on 8.2.2002 and due permission of respondent no. 1 was obtained regarding the same. Thereafter the petitioners took various steps for acquisition, installation of machinery, and creating other infrastructure for starting production. In due course it obtained permission from the Electrical Inspector to install 140 KV Generator. By 28.3.2002, the petitioners obtained necessary consent from the Maharashtra Pollution Control Board. By 26.2.2002 the petitioners started purchasing raw material. It had obtained loan from Jalgaon Janata Bank. The production was started successfully on 20.3.2002. By 21.3.2002 it had invested about Rs. 96 lac on the project. This was all done to complete necessary steps before cut off date given in the letter of intent which was 31.3.2002. 6. Under the circumstances, the petitioners were under legitimate expectation of getting benefit of the package scheme on both counts including exemption in sales tax and cash incentives popularly known as subsidy. Thereafter the petitioners approached respondent no. 2 by representation dated 5.6.2002 and pursued the matter. The respondents thereafter informed that under the Government Circular dated 23.3.2000 the cut off date was 31.12.2001 and the petitioners ought to have started production by that date, but this was contrary to the cut off date i.e. 31.12.2001 mentioned in the letter of intent. The petitioners did not bring to the notice of the respondents that the cut off date was 31.12.2001 prior to its starting production. Under the circumstances, the petitioners have to meet tough competition with other PVC pipe units. It is also stated that the action of the respondents is illegal and arbitrary. There is no rational basis for denying the benefits of the package scheme and in the circumstances the petitioners have approached this Court with various reliefs as stated above.7. Respondent nos. 2 and 3 have filed their affidavit in reply stating in paras 8 and 9 that the petitioner unit has made application for benefits of incentives on 28.3.2000 and, therefore, the case comes under the said pipe line case. Pursuant to this, the petitioner was issued the letter of intent on 30.12.2000 which is annexed at "A", pages 13 to 17, with the petition. However, in the letter of intent in clause 5 date for completing final effective steps occurred as 31.3.2002 instead of 31.12.2001 by mistake/computer error. However, as per the instructions issued by the Director of Industries and the notification dated 23.3.2000, the cut off date of letter of intent of pipe line case is 31.12.2001. In other words, the Government wants to resist the petition on the ground that it was mere error in mentioning the date in the letter of intent.8. It is further stated in the affidavit in reply that the Government Resolution dated 12.5.2000 intimating that limit for the said package scheme of incentives of 1993 which earlier was extended upto 31.12.1999 was further extended and last date for submitting applications for classification by the unit in pipe line case would be 31.3.2000. Thus earlier cut off date for eligibility of the benefits was substituted as 31.3.2000 as provided in clause 3(ii). In the said Government Resolution in the preamble it has been provided that the concerned units were eligible for the benefits other than the sale tax. The same provision is incorporated in clause 3(iv) of the said Government Resolution. It is also stated that these Government guidelines were published in daily "Loksatta" dated 14.3.2000 and also through letter dated 22.3.2000 sent to the district Information Officer, Jalgaon for publication, copy of which is produced at Exh. "R-4" with the affidavit in reply. 9. At the time of arguments, learned advocate for the petitioners produced a copy of letter dated 15.2.2007 signed by the General Manager, District Industries Centre, Dhule, which, according to the petitioners, was obtained under the Right to Information Act. Therein, to a query, "how many units in pipe line case who have taken final effective steps after 31.12.2001 but before 31.3.2002 and have granted EC with Sales Tax incentives under PSI-1993 scheme", the answer was, "one unit only in Dhule district". So, it is argued that the Government did extend benefit of incentives regarding sales tax to a unit which had taken effective steps after 31.12.2001 but before 31.3.2002. 10. The main thrust of the arguments of the petitioners is on the principle of promissory estoppel and for that purpose the petitioners wish to rely on some authorities.11. In Tapti Oil Industries & another vs State of Maharashtra & others [1984 (1) Bom. C.R. 485], the Full Bench of this Court made following observations in para 17 :-"17. Now, so far as the principle of promissory estoppel is concerned, it is really too late in the day to contend that it cannot provide a cause of action to a person if there is sufficient material which shows that on certain representations made by the State or by the authority of the State, a person has changed his position and this must necessarily result in preventing the State from going back on its representations. We need not go back to the leading authority on the concept of promissory estoppel in the Anglo Afghan case, AIR 1968 SC 718 . " Their Lordships considered the factual aspect of Anglo Afghan case. In that case the Textile Commissioner had created a right that the Exporters exporting the woolen goods to Afghanistan would be entitled to import raw material of the total amount equal to 100 per cent of the F.O.B. value of the exports. Under the scheme the Textile Commissioner had an authority to even reduce the import certificate in case he found that a fraudulent export was made to secure an import in excess of the true value of the goods exported. Thereafter in same para 17 following observations from para 23 of the case of the Supreme Court are produced: - "Under our jurisprudence the Government is not exempted 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." Thus it is argued before us that the State is bound by the principle of promissory estoppel and if certain benefits are offered by the State on fulfillment of particular conditions, then the State cannot back out. The Full Bench observed in para 23 as follows: - "23. We are unable to endorse the view of the Division Bench that the scheme being executive in character, no enforceable right can be spelt out on the basis of the scheme in favour of one who complies with the requirements of the scheme and therefore, claims that he is entitled to the benefits of the scheme. Admittedly excepting the exemption claimable in respect of sales tax, which could be referable to the provisions of section 41 of the Bombay Salex Tax Act, the State Government was not exercising any powers regarding the other exemptions under any statutory law but the absence of a statute did not prevent the State Government from granting other benefit which it thought necessary to grant for the purpose of development of the backward regions of the State. Such an action was clearly executive in nature. When some representations are made by the State Government that unless a manufacturing unit complied with the conditions specified in the scheme, it would not be entitled to certain exemptions or certain benefits, the manufacturing unit or a person interested is entitled to take these promises and representations at their face value and act upon it. "Thus it is argued before us that if the present petitioners acting on representations made in the scheme and the letter of intent incurred expenditure, set up a manufacturing unit in the hope that the Government would abide by its word and act according to representations, there is no reason why even while acting in its executive capacity and not under any legislative powers, the State Government cannot be compelled to abide by representations made by it. This is exactly what the Full Bench has laid down in the case of Tapti Oil Industries.12. In this case, the petitioners rely on Exh. A, which is a copy of the letter of intent. It is dated 30.12.2000. It refers to the application-dated 28.3.2000 in form no. 1 under the provisions of the Government Resolution No. IDL 1093/(889) INO 8, dated 7.5.1993 as amended from time to time for grant of eligibility certificate. The letter was addressed to M/s Shri Pulp and Paper. Clause 5 of the said letter is as follows: -"5. This Letter of Intent will be rendered invalid if the final effective steps are not completed by 31st March 2002." The General Manager, District Industries Centre, Jalgaon, issues the letter of intent, which is respondent no.3. So, it is clear that all final effective steps were to be taken prior to 31.3.2002. The copy of the Government Resolution dated 23.3.2000 is produced on record with the petition, on which the respondents want to rely. It lays down that the eligible unit shall have to complete all the final effective steps on or before 31.12.2000 and then alone it will be entitled to various benefits.13. It is worth noting that the letter of intent is issued on 30.12.2000. There is nothing on record to show that the said mistake of cut off date was ever informed by any of the respondents to the petitioners before letter dated 20.2.2002 was issued by respondent no. 3 to the petitioner. The copy of it is produced as Annexure E to the petition.14. Learned advocate for the petitioners argued that relying on the date mentioned in the letter of intent the petitioners took all steps to set up factory and start it before 31.3.2002. Exh. B to the petition is a letter dated 8.2.2002 issued by respondent no. 3 to M/s Shri Pulp and Paper granting the request of M/s Shri Pulp and Paper for change in constitution from Proprietory to Private Limited and the change of name of the unit from M/s Shri Pulp and Paper to M/s Gitesh Pipes Pvivate Limited which is petitioner no.1. This according of sanction for the change in constitution and name on 8.2.2002 is a circumstance, which shows that the petitioners were under impression that they were entitled to get benefit of the scheme including sales tax, as the cut off date was 31.3.2002. It may be noted that this letter-dated 8.2.2002 also refers to the letter of intent dated 30.12.2000. 15. At Exh. C to the petition is a letter granting consent to the petitioner no. 1 by the Maharashtra Pollution Control Board on 28.3.2002. At page 65 with the petition, there is a letter dated 7.2.2002 issued by the Jalgaon Janata Sahakari Bank Limited, which is a letter of sanction of loan. It is clear that total loan of Rs. 1.90 crore was sanctioned and rate of interest was 17 per cent for term loan and 18 per cent for hypothecation. This shows that on the basis of the letter of intent the petitioners have approached Jalgaon Janata Sahakari Bank Limited and obtained sanction for loan of Rs. 1.90 crore in February, 2002. On page 67 there is a copy of certificate issued by the Chartered Accountants K.K. Kabra & Co. on 22.3.2002 stating that upto 21.3.2002 the expenditure made by petitioner no. 1 for their project of manufacuring of PVC pipes & Fittings was as follows :----------------------------------------------Description Amount in Lacs (Rs.)1. Leasehold Land 2.802. Building 20.003. Machinery 73.004. Others 00.00----------------Total - 95.80-------------------------------------------------------------Thus, total amount spent on land, building, machinery was Rs. 95.80 lacs. At page 68 there is a letter issued by the Superintending Engineer, O & M Circle, Maharashtra State Electricity Board to the Executive Engineer, M.S.E.B. UCR Dvn. Jalgaon informing sanction of High Tension Power Supply to the petitioners. 16. By letter dated 20.3.2002 which is produced as Annexure E to the petition, respondent no. 3 has informed that as per Government Resolution dated 23.3.2000 the last date for completing all stages was 31.12.2001 and, therefore, within 15 days from the date of the letter they should produce all necessary documents so that they will be entitled for all benefits except sales tax. It is this letter which is challenged. According to the petitioners, this was the first communication in which it is said that the petitioners would not be entitled to benefit of sales tax but only to the subsidy and again it is said that they have to complete the steps before 31.3.2002. So this letter in one sentence stated that the last date for completion as per the Government Resolution was 31.12.2001, but then it is said that the petitioners would be entitled to the benefits other than sales tax if they complete all stages before 31.3.2002.17. Along with the affidavit in reply, the respondents have produced the original package scheme of incentives 1993 as Annexure R-1 and its preamble discloses that package scheme of incentives which is a scheme introduced in order to achieve dispersal of industries outside the Bombay-Thane-Pune belt and to attract them to the underdeveloped and developing areas of the State. Para 2 shows that the implementing agency was the District Industries Centre which is respondent no. 3 in this case. Para 3.3 shows what are the effective steps which are to be taken for getting benefits. Para 5 deals with incentives and para 5.1 deals with sales tax incentives which include sales tax incentives by way of exemption, sales tax incentives by way of deferal, and sales tax incentives by way interest free unsecured loan, etc. 18. In the case of Hitech Electrothermics & Hydropower Ltd. vs. State of Kerala and others (2003) 3 SCC 716, the Kerala Government in its industrial policy offered concessional tariff rate for a five year period to new industries from the date they commenced such production between 1.1.1992 and 31.12.1996. The Electricity Board adopted that policy. The appellant industry was granted registration certificate by District Industries Centre in 1993 and the Board accorded sanction for power to it in 1995. However, the Board, despite repeated requests, provided power connection only in 1998 and such an inaction on the part of the Board prevented appellant from starting production within the prescribed time limit i.e. 31.12.1996. It was held that, under the circumstances, concessional rate cannot be denied to the appellant on literal interpretation of the Governments policy as adopted by the Board. The Supreme Court directed concessional rate to be granted to the appellant which commenced production, though not by 31.12.1996, but for a period of 3 years. 19. The doctrine of promissory estoppel was considered by the Supreme Court recently in the case of Southern Petrochemical Industries Co. Ltd. vs Electricity Inspector and E.T.I.O. & Ors. [2007 AIR SCW 3752]. The case related to tax on electricity consumed. In para 135 it is observed that the doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications expressed under the statutory provisions, but also under the executive instructions. 20. In this case the respondents have stated that publication was given regarding notification dated 12.5.2000 in daily "Loksatta" dated 14.3.2000. Its copy is not produced. It is not known whether it has wide circulation in Jalgaon district. Secondly it is also stated that the District Information Officer, Jalgaon was informed by letter dated 22.3.2000 regarding giving publicity. There is nothing to show whether he acted on the letter and how he had given publicity. So the respondents have not brought on record evidence to show that the petitioners knew or there is reason to believe that they knew the facts and there was no question of they being misled by the representation. 21. It is not the case of the respondents that the doctrine of promissory estoppel cannot be invoked by the petitioners because the Government has been acting in discharge of its duty in law or that acting in pursuance of the representation made in the letter of intent would be against any statute. It also does not appear that the doctrine is invoked against the legislative power of the State nor it is said that special considerations necessitated the respondents not to comply with the representation in the letter of intent in the public interest. So, the respondents have not brought their case under any of the exceptions to the doctrine of promissory estoppel.22. So, considering the facts and circumstances, it is abundantly clear that the petitioners were represented by the respondents by letter of intent Exh. A that the effective steps had to be completed by 31.3.2002. On the said representation the petitioners have acted upon. They purchased land to set up factory after obtaining loan from the Bank. They have also obtained loan of Rs. 1.90 crores, power supply and the no objection certificate from the Maharashtra Pollution Control Board. Respondent no.3 is admittedly agency of respondent nos.1 and 2 and respondent nos.1 and 2 cannot deny the representation/act made/committed by their representative/agent i.e. respondent no.3. In the circumstances, therefore, in our considered opinion, the petitioners are entitled to the benefit of the concessions which were promised by the letter of intent. In the facts and circumstances of the case, we hold that the Government Circular dated 23.3.2000 which provides 31.12.2001 as cut off date will not be applicable to the petitioners in view of the letter of intent in which 31.3.2002 is mentioned as the cut off date. Therefore, the petitioners are entitled to grant of S.T.I. incentives under the package scheme of 1993.

Decision reasoning: 1[ds]16. By letter dated 20.3.2002 which is produced as Annexure E to the petition, respondent no. 3 has informed that as per Government Resolution dated 23.3.2000 the last date for completing all stages was 31.12.2001 and, therefore, within 15 days from the date of the letter they should produce all necessary documents so that they will be entitled for all benefits except sales tax. It is this letter which is challenged. According to the petitioners, this was the first communication in which it is said that the petitioners would not be entitled to benefit of sales tax but only to the subsidy and again it is said that they have to complete the steps before 31.3.2002. So this letter in one sentence stated that the last date for completion as per the Government Resolution was 31.12.2001, but then it is said that the petitioners would be entitled to the benefits other than sales tax if they complete all stages before 31.3.2002.17. Along with the affidavit in reply, the respondents have produced the original package scheme of incentives 1993 as Annexureand its preamble discloses that package scheme of incentives which is a scheme introduced in order to achieve dispersal of industries outside thebelt and to attract them to theunderdeveloped and developing areas of theState. Para 2 shows that the implementing agency was the District Industries Centre which is respondent no. 3 in this case. Para 3.3 shows what are the effective steps which are to be taken for getting benefits. Para 5 deals with incentives and para 5.1 deals with sales tax incentives which include sales tax incentives by way of exemption, sales tax incentives by way of deferal, and sales tax incentives by way interest free unsecured loan, etc. 18. In the case of Hitech ElectrothermicsHydropower Ltd. vs. State of Kerala and others (2003) 3 SCC 716, the Kerala Government in its industrial policy offered concessional tariff rate for a five year period to new industries from the date they commenced such production between 1.1.1992 and 31.12.1996. The Electricity Board adopted that policy. The appellant industry was granted registration certificate by District Industries Centre in 1993 and the Board accorded sanction for power to it in 1995. However, the Board, despite repeated requests, provided power connection only in 1998 and such an inaction on the part of the Board prevented appellant from starting production within the prescribed time limit i.e. 31.12.1996. It was held that, under the circumstances, concessional rate cannot be denied to the appellant on literal interpretation of the Governments policy as adopted by the Board. The Supreme Court directed concessional rate to be granted to the appellant which commenced production, though not by 31.12.1996, but for a period of 3 years. 19. The doctrine of promissory estoppel was considered by the Supreme Court recently in the case of Southern Petrochemical Industries Co. Ltd. vs Electricity Inspector and E.T.I.O.Ors. [2007 AIR SCW 3752]. The case related to tax on electricity consumed. In para 135 it is observed that the doctrine of promissory estoppel would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes or charges on the basis of the current tariff. Such a policy decision on the part of the State shall not only be expressed by reason of notifications expressed under the statutory provisions, but also under the executive instructions. 20. In this case the respondents have stated that publication was given regarding notification dated 12.5.2000 in daily "Loksatta" dated 14.3.2000. Its copy is not produced. It is not known whether it has wide circulation in Jalgaon district. Secondly it is also stated that the District Information Officer, Jalgaon was informed by letter dated 22.3.2000 regarding giving publicity. There is nothing to show whether he acted on the letter and how he had given publicity. So the respondents have not brought on record evidence to show that the petitioners knew or there is reason to believe that they knew the facts and there was no question of they being misled by the representation. 21. It is not the case of the respondents that the doctrine of promissory estoppel cannot be invoked by the petitioners because the Government has been acting in discharge of its duty in law or that acting in pursuance of the representation made in the letter of intent would be against any statute. It also does not appear that the doctrine is invoked against the legislative power of the State nor it is said that special considerations necessitated the respondents not to comply with the representation in the letter of intent in the public interest. So, the respondents have not brought their case under any of the exceptions to the doctrine of promissory estoppel.22. So, considering the facts and circumstances, it is abundantly clear that the petitioners were represented by the respondents by letter of intent Exh. A that the effective steps had to be completed by 31.3.2002. On the said representation the petitioners have acted upon. They purchased land to set up factory after obtaining loan from the Bank. They have also obtained loan of Rs. 1.90 crores, power supply and the no objection certificate from the Maharashtra Pollution Control Board. Respondent no.3 is admittedly agency of respondent nos.1 and 2 and respondent nos.1 and 2 cannot deny the representation/act made/committed by their representative/agent i.e. respondent no.3. In the circumstances, therefore, in our considered opinion, the petitioners are entitled to the benefit of the concessions which were promised by the letter of intent. In the facts and circumstances of the case, we hold that the Government Circular dated 23.3.2000 which provides 31.12.2001 as cut off date will not be applicable to the petitioners in view of the letter of intent in which 31.3.2002 is mentioned as the cut off date. Therefore, the petitioners are entitled to grant of S.T.I. incentives under the package scheme of 1993.