Case: State Of Rajasthan  Vs. J.K. Udaipur Udyog Ltd.

The scheme was part of the New 4th Industrial Policy of the State. The Policy stated that the object of the scheme was to make Rajasthan a most favoured destination for industries and to encourage the setting up of industries in the State. The policy describes the nature of the exemptions which were sought to be granted to the different kinds of industries with exemption / deferment incentives for 11 years in respect of some industries and 14th years for others. A greater incentive was granted to industries being set up in the five industrial growth centres in the State. The incentives available during the first year were to be gradually tapered off to a particular percentage of the fixed capital investment at different rates in respect of some industries. However, in respect of cement industries the percentage of exemption proposed was at a flat rate of 25% for 11 years. According to the policy the scheme would also give benefits for the first time to sick units. The sick units were classified into two categories as"Those units which have not availed of any benefits in the past will get full benefits at par with a new unit.(2) Those units which have availed of sale tax benefits in the past will get ST benefit on a tapering basis up to 11 years (maximum 80% and minimum 10% exemption/deferment on a tapering basis).Pursuant to this Policy the Rajasthan Sales Tax/ Central Sales Tax Exemption Scheme for Industries, 1998 (referred to as the scheme) was framed and notified in exercise of the powers conferred on the State Government by Section 15 of the Rajasthan Sales Tax Act, 1994 (referred to as RST Act) and by sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (referred to as the CST Act), the Scheme came into force from 1st April 1998. Clause 1-(b) of the scheme envisages that "an industrial unit which commences commercial production during the operative period of this scheme, shall be entitled to claim benefits under this scheme". Clause 3(a) provides that the scheme shall be applicablethe new industrial units;(ii) the industrial units going for expansion;(iii) the industrial units launching diversification; and(iv) the sick industrial units.A New Industrial Units has been defined in clause 2(k)New Industrial Unit means an industrial unit which commences commercial production during the operative period of this Scheme including a unit set up on the site of an existing industrial unit by making separately identifiable capital investment; subject however, that where an industrial unit manufacturing the same product is established on the site of an existing unit, the benefit permissible for a new unit shall be available to it only on the production in excess of 80% of the installed capacity of the existing unit.(ii) "New Industrial Unit" shall also include a sick unit:-"(a) which has not availed of any benefits of exemption from tax or deferment of tax;(b) which has been appraised by financial institution and appropriate rehabilitation plan has been formulated; and(c) which has been purchased by a new management other than by way of collusive transfer and such management has made additional fixed capital investment not less than25% of the depreciated value of the assets of such unit.The Respondents in these appeals viz. M/s. J.K. Udyog and J.K. Synthetics Ltd. were writ petitioners before the High Court of Rajasthan and are companies which manufacture cement in different units within the State of Rajasthan. The respondent-companies in these appeals are undisputedly sick.While the application of M/s. J.K. Synthetics was pending for consideration by the Screening Committee, the corrigendum was issued on 30th September, 1999, by the Finance Department inter-alia, amending the third column against Srl. No. 4 of Annexure B by replacing the phrase "New Units at Srl. No. 1" with New units at Srl. No. 1, 2 and 3 as the case may be". Thus sick cement units under Srl. No. 4(a) were expressly put on par with new cement units under Srl. No. 3.15. M/s. J.K. Synthetics Limited submitted a representation to the Screening Committee that the corrigendum should not affect the company. The Screening Committee deferred its decision on the ground that as the particular unit of M/s. J.K. Synthetics Limited in respect of which the exemption was claimed was not sick, although the company itself had been declared sick, it should await the rehabilitation programme duly approved by the BIFR providing the benefit of sales tax incentives scheme to all such units. While deferring the case till the approval of the rehabilitation programme by BIFR, the Screening Committee said that the unit could avail of the benefit under the scheme to the extent permissible under the corrigendum. Neither any sanction under clause 4(e) and consequently no Eligibility Certificate under clause 4(f) have been issued to M/s. J.K. Synthetics Limited under the scheme till today.16. As far as M/s. Udaipur Udyog Limited is concerned, its application under the scheme was certified as complete under Clause 4(h) on 26th July, 1999 and was sanctioned on 30th December, 1999. However, the quantum of benefit was granted in terms of the corrigendum from the date of issuance of the corrigendum. The eligibility certificate was issued to M/s. J.K. Udyog on 29th February, 2000 also restricting the benefits under the scheme on the basis of the corrigendum.17. Since the respondent had been availing of the higher rates of exemption against Srl. No. 1, consequent upon the decision of the Screening Committee granting the benefits under the corrigendum, provisional assessment orders and notices were issued to both the respondent companies by the Sales Tax Authorities over the differential sales tax.18. M/s. J.K. Synthetics Limited and J.K. Udyog Limited filed separate writ petitions before the High Court of Rajasthan challenging the corrigendum dated 30th September, 1999; in the alternative a prayer was made to hold that the corrigendum had no application to the respondent companies; for quashing the decisions of the Screening Committee in so far as the respondent companies were given the benefit of the exemption scheme on the basis of the corrigendum and for quashing the provisional assessment orders andlearned single Judge accepted the submission of the respondent companies that the impugned corrigendum really amounted to an amendment of the scheme. But it was held that the State Government was competent to modify the scheme and, therefore, the respondent companies were entitled to relief in terms of the scheme as originally notified up to the date of amendment and subsequent and subsequent thereto as provided in the corrigendum. Since the corrigendum had been published in the Official Gazette on 7th January, 2000 it was held that it would be applicable with effect from that date.21. Several appeals were preferred both by the State of Rajasthan as well as by the respondent companies from the decision of the learned Single Judge. The Division Bench disposed of all the appeals by the judgment impugned before us. The Appellate Court agreed with the learned Single Judge that the corrigendum notification was in fact an amendment of the scheme and therefore, this would operate only prospectively i.e. from 7th January, 2000. The plea of the respondent companies that the State Government was bound by the principles of promissory estoppel from modifying or amending the scheme was negated by the Division Bench. The respondent companies have not sought to challenge this conclusion before us. The Division Bench however held that the rights of the respondent companies of enjoying the benefit under the original scheme including the maximum amount of exemption, the maximum period of exemption, and the percentage of exemption were available to the respondent companies with effect from the date of certification of their applications under clause 4(h) and were substantive and that these rights could not be affected adversely unless the subsequent notification clearly manifested an intention to do so. It was held that the corrigendum did not contain any such explicit provision nor could any inference be drawn that accused rights were to be affected. It was held that even if this proposition was unacceptable, the amendment was arbitrary and violative of Article 14 being discriminatory vis-a-vis other sick industries. It was further held that the amendment could not discriminate against sick cement plants which had not availed of benefits of tax exemption earlier, so that such sick industries were treated in a manner worse than sick cement industries which had availed of exemptions from sales tax earlier. The Division Bench accordingly held that the respondent companies were entitled to avail of the benefits under the scheme as originally notified in the manner provided in column 3 of Serial No.1 of Annexure B read with Serial No. 4(a) and that such rights were not affected by the corrigendum published on 7th January, 2000. However, the corrigendum notification itself was not quashed as had been prayed for.22. The appellants have impugned the decision of the Division Bench and have contended that the Division Bench had erred in fact and in law in coming to the conclusion that the respondent companies had a vested right to the benefits of the scheme as available to new units, under Srl. No. 1 of Annexure B to the scheme. It is pointed out that as far as J.K. Synthetics is concerned its application has not been sanctioned at all. It is contended that the corrigendum notification was in fact a corrigendum and not an amendment, and that the corrigendum merely made explicit the intention of the State Government to treat the sick units of a particular industry on par with new units of such industries. It is further contended that even if the corrigendum were construed as an amendment, the State Government had the power to withdraw or modify the benefit of the scheme not only under Section 15 of the RST Act read with Section 8(5) of the CST Act but also under clause (9) of the scheme which provides for power to the State Government to review or modify the exemption scheme "as and when needed in public interest". It is submitted that an exemption is in the nature of a concession and was by that reason a defeasible right. It is submitted that exemptions granted could not create any vested right in the beneficiaries of the exemption to the continued grant of the exemption until and unless the beneficiary was able to establish that the State Government was bound by the principles of promissory estoppel from modifying or withdrawing the concession. It is submitted that since the respondent companies had failed to establish any promissory estoppel on the part of the State Government, the Government could withdraw or modify the concession given at least from the date of the publication of the corrigendum notification. As far as the High Courts findings on the issue of discrimination is concerned, it is submitted that in fact there were no other cement units in the State in comparison with which it could be said that the respondents-companies were being unfairly treated. The language of Srl. No.3 in Annexure B was also relied upon to contend that the corrigendum was not discriminatory and merely treated sick cement units and new cement units equally.

Reasoning:
In any event, the High Court erred in fact in holding that M/s. J.K. Synthetics had a vested right to the benefits of the scheme. Clause 4 of the scheme clearly provides that the benefits under the scheme were subject to the sanction of the Screening Committee. No sanction has been issued to M/s. J.K. Synthetics tillfrom this, the exemption being a creature of the scheme is subject to the scheme. Clause 9 of the scheme makes it clear that the right under the scheme was temporary in the sense that the scheme could be modified or reviewed. It is true that clause 9 also provides that such review or modification could take place only in the public interest. But nevertheless the right conferred was a modifiable or revocable one. If any right under the scheme is held to be unmodifiable it would be contrary to the scheme itself. Therefore even if one were to assume that the respondent companies were entitled to the benefits of the scheme on par with new units under Srl. No.1 with effect from the date of the certification of their application under clause 4(h), the right could be modified with effect from the date on which the scheme was modified. The further argument of the respondent that the subsequent notification could not be construed as a modification and would apply only to subsequent applicants is unacceptable. There is no ambiguity in the language of the subsequent notification. On the contrary the use of the word corrigendum itself indicates the intention was to correct and to rectify what the State Government thought had been erroneously done.Coming now to the question of public interest. The 4th New Industrial Policy pursuant to which the scheme had been framed by the State Government was indisputably in the public interest. Therefore, if the intention of the State Government was to effectuate the policy by issuing the subsequent notification it cannot be said that the State Government was not acting in the public interest. The Industrial Policy which resulted in the exemption scheme expressly provided that the rate of benefits which were to be given to sick industrial units which had not availed of any such benefits in the past would be at par with a new unit. But does this mean that the words "new unit" in the policy referred to industries under Srl. No. 1? We think not. New units of different kinds of industries had been separately classified both under the policy and under Srl. Nos. 1,2 and 3 of Annexure B to thethrust of the industrial policy was to give an incentive to new entrepreneurs. It is true that there are separate provisions for sick industries but given the main object of the policy to make Rajasthan a "most favoured destination for industries", it could not have been the intention of the State Government to give a lower benefit to new industries and to give higher benefits to sick industrial units already established in the State. However, when the scheme was first notified although the body of the scheme effectuated the objective, the entry under column 3 against Srl. No.4 in Annexure B did not clearly reflect this. Doubtless the interpretation put by the respondent companies and accepted by the High Court on the entries against Srl. No. 4 as it originally stood in Annexure B, is possible interpretation, but in our opinion Annexure B was equally susceptible of the interpretation put forward by the appellants before us particularly in the context of the Industrialcounsel for the respondents additional contention is that the Screening Committee had proceeded on the basis that the sick cement units were covered under Srl. No.4 and not Srl.No.3. It is argued that such decision of the Screening Committee being final in terms of Clause 4(a) of the scheme, it was not open to the State to contend otherwise. The argument is without force. The finality given to the decision of Screening Committee in terms of Clause 4(a) is "subject to other provisions provided for in the scheme". Any decision of the Screening Committee cannot be contrary to the provisions of the scheme. Besides all that the Screening Committee has held is that the respondent companies are to be treated on par with other cement companies, with effect from the date of the subsequent notification. That is also what the appellants contend, namely that Srl.No.4(a) expressly puts sick cement units on par with new cement units under Srl.No.3.34. The respondent companies are therefore required to avail of the benefits under the scheme on the basis of the corrigendum with effect from 7.1.2000. Learned counsel for the respondent companies may be right in his contention that if a sanction is granted and an Eligibility. Certificate issued on the basis of the sanction, then having regard to the provisions of Section 4(h) the period of exemption under the sanction ought to cover the date of the certification of the application as complete under Clause 4(h). But it is again unnecessary to decide the ambit of the Screening Committees power, as the appellants have not argued that the benefits of the higher rate of exemption already availed of by the respondent companies with effect from the date of certification under clause 4(h) up to 7th January, 2000 should be taken away fromfar as M/s. J.K. synthetics is concerned, their right to obtain benefits under the scheme by reason of clause 4(b) was in any event provisional. The undertaking given by this company was to the effect that the benefits of the scheme were being availed at the risk of the company till the sanction was granted by the Screening Committee. Since no sanction has been granted to the company, the company was aware that its rights to the benefits under the scheme were conditional and that it might be called upon to meet its sales tax liabilities in the event sanction was not granted on its application.41. In such circumstances it must be open to the State Government to recover sales tax dues as it is entitled to under the RST Act allowing the respondent companies to only keep such benefits as had been already availed of by then upto 7th January, 2000 and thereafter at the rates specified and according to the provisions of the scheme as modified by the corrigendum notification. However no interest or penalty will charged from the respondent companies by the appellants on the differential amounts for the period the matter was sub judice before this Court provided the respondent companies pay the principal amount of sales tax within such time as may be specified by the appellants in this