The judgment of the court was delivered by
S. NATARAJAN J.-In this appeal by certificate under
article 133(1)(c) of the Constitution, two questions fall for consideration,
viz:
" (1) Whether the appellants had acquired a vested
right of exemption from payment of sales tax under the Gujarat Sales Tax Act
1969 (for short " the Act "), for a period of 5 years from the date of
commissioning of their oil mill in respect of purchases and sales relating to
the business of their oil mill? and
(2) Whether, in any event, the appellants are entitled to
claim tax exemption for a period of 5 years under cover of the doctrine of
promissory estoppel ? "
In order to achieve dispersal of industries to rural areas
and to provide fillip to accelerate development of industries, the Government of
Gujarat (" Government " in short) issued a notification on April 29,
1970, in exercise of its powers under section 49(2) of the Act exempting wholly
or partly from payment of sales tax or purchase tax, as the case may be, certain
specified classes of sales and purchases described in the entries at serial Nos.
1 to 52 in the Schedule. The said notification was subsequently amended by
another notification dated November 11, 1970, and a new entry, entry No. 53, was
added in the Schedule below entry at serial No. 52. The new entry consisted of
two parts, one part giving exemption from purchase tax and the other from sales
tax. The notification provided that subject to the conditions specified therein,
a manufacturer who establishes a new industry would be given exemption of "
the whole of purchase tax under section 15 of the Act " in respect of
" purchase of raw materials, processing materials, machinery or packing
materials from person who is not a registered dealer ". It was similarly
provided that subject to the conditions prescribed in the notification, a
manufacturer who establishes a new industry would be given exemption of the
whole of sales tax leviable under the Act in respect of " sales of raw
materials, and processing materials by a registered dealer ". One of the
conditions imposed was that the new industry should have been commissioned on or
after April 1, 1970, in areas beyond 24 kilometres from the municipal limits of
the cities of Ahmedabad and Baroda and 16 kilometres from the municipal limits
of Surat, Bhavnagar, Rajkot and Jamnagar and that the manufacturer should obtain
an eligibility certificate form the Industries Commissioner, Gujarat State,
certifying the fulfilment of these conditions. The notification provided that a
certified manufacturer " shall be entitled to the exemption for a period of
five years from the date of commissioning of the industry as certified by the
Industries Commissioner in the eligibility certificate ". There was an
Explanation in the notification to define what a " new industry "
means and it was in the following terms:
" For the purpose of items (1) and (2) above, 'new
industry' means and includes an industry which has been commissioned at any time
during the period from April 1, 1970, to March 31, 1975 (both days inclusive);
but shall not include such industrial undertaking established by transferring or
shifting or dismantling an existing industrial unit ".
The appellants had set up a plant for decorticating and
crushing cotton and groundnut seeds for manufacture of oil at a place called
Kadi beyond 24 kilometres from Ahmedabad and commissioned the plant on May 17,
1970. On the strength of the location of the oil mill at a place more than 24
kilometres from the municipal limits of Ahmedabad and the commissioning of the
plant on May 17, 1970, the appellants applied to the Industries Commissioner for
an " eligibility certificate " for claiming exemption from payment of
sales tax as per the notification dated November 11, 1970. The Industries
Commissioner rejected the application giving certain reasons therefor. The
appellants thereupon filed Special Civil Application No. 562 of 1971 under
article 226 of the Constitution for an order directing the Industries
Commissioner to grant them an eligibility certificate in terms of the
notification.
During the pendency of the petition, the State Government
issued another notification dated July 17, 1971, amending the Explanation
contained in the notification dated November 11, 1970. The amendment provided,
inter alia, that " new industry " shall not include " any of the
industries, whether so commissioned or not, mentioned in the table appended
hereto ". The table set out some 14 industries of which the twelfth was
" decorticating, expelling, crushing, roasting, parching, frying of
oilseeds and colouring, decolouring and scenting of oil ". It would appear
that the effect of the exemption was reviewed by the Government and on such
reconsideration " the Government was satisfied that certain industries and
the oil industries in particular were sufficiently dispersed in rural areas, in
respect of which the existing capacity of the existing industries was also more
than adequate " and " the Government reached the conclusion that
certain industries required to be excluded from the purview of the Act ".
As the oil mill commissioned by the appellants fell within the denotified
industries, the appellants obtained the leave of the court and amended their
petition suitably in order to contend that the notification dated July 17, 1971,
would have no effect on the eligibility already acquired by them to claim
exemption from payment of sales tax in the light of the provisions contained in
the second notification dated November 11, 1970.
The appellants' petition and a connected matter, viz.,
Special Civil Application No. 1307 of 1971 filed by a third party came to be
considered together by a Division Bench of the Gujarat High Court. The High
Court, by its judgment dated March 8, 9, 1972, held that the notification dated
July 17, 1971, was only prospective in operation and not retrospective, that it
did not affect the exemption enjoyed by the petitioners under the notification
dated November 11, 1970, in respect of purchases and sales effected prior to
July 17, 1971, that the notification dated November 11, 1970, created only
existing rights and not vested rights and such existing rights could be taken
away by the notification dated July 17, 1971. The High Court, therefore, ruled
that the appellants were entitled to exemption from payment of tax only for the
period anterior to July 17, 1971, and for the period thereafter they had no
right to claim exemption. Being aggrieved, by the non-grant of relief of tax
exemption for the full period of 5 years, the appellants have preferred this
appeal after obtaining certificate under article 133(1)(c) of the Constitution.
Mr. Desai, learned counsel for the appellants, formulated
his arguments under three heads to contend before us that the High Court ought
to have granted relief to the appellants to the full extent of their claim and
it should not have restricted the relief of tax exemption only for the period
May 17, 1970, to July 17, 1971. The propositions put forward were in the
following terms:
1. By virtue of the notifications dated April 29, 1970,
and November 11, 1970, the appellants had acquired a vested right to a tax
holiday for period of 5 years and the Government, acting in exercise of its
delegated powers, did not have competence to nullify the exemption by giving
retrospective effect to its notification dated July 17, 1971.
2. The High Court was not justified in drawing a fine
distinction between vested rights and existing rights and holding that the
notifications created only existing rights and such rights are subject to
defeasance by means of subsequent notifications.
3. In any event, the appellants are entitled to the
benefit of tax exemption for a period of five years on the ground of promissory
estoppel and the Government is obligated to give tax exemption for the full
period of claim.
Elaborating the first two contentions, Mr. Desai argued
that the Government by virtue of the first and second notifications had
irretrievably committed itself to grant exemption from payment of sales tax and
purchase tax to the notified industries commissioned at any time after April 1,
1970, and before March 31, 1975, at places beyond the prescribed distances from
the municipal limits of the cities named in, the notification. Inasmuch as the
appellants had established their oil mill at a place more than 24 kilometres
away from the municipal limits of Ahmedabad City and had commissioned the plant
on May 17, 1970, Mr. Desai argued that the appellants had acquired a vested
right of exemption and it was not, therefore, open to the Government under law
to nullify the exemption by issuing the notification dated July 17, 1971, in
exercise of its delegated powers.
The merit of these contentions has to be determined with
reference to the date of commissioning of the appellants' oil mill as well as
the dates of the notifications and their contents. Admittedly, the appellants'
oil mill was commissioned on May 17, 1970, and, therefore, it follows that the
oil mill was commissioned after the first notification but long before the
second notification. It is indisputable that the first notification, though it
provided for exemption of tax under the Act, did not provide for any period of
exemption. In other words, the notification did not stipulate as to how long the
exemption from sales tax would remain in operation. The position emerging
therefrom is that the exemption granted under the notification was to have
operative force only till such time that the exemption was allowed to remain
before being withdrawn by a subsequent notification. The second notification no
doubt set out that the exemption granted would be for period of 5 years from the
date of the commissioning of the industry at any time during the period from
April 1, 1970, to March 31, 1975 (both days inclusive). But this provision
cannot be invoked by the appellants for claiming the benefit of tax exemption
for five years because the second notification was prospective in operation, as
has been rightly pointed out by the High Court in its judgment. Since the second
notification was prospective in operation, the period of 5 years mentioned
therein would apply only to those new industries which were commissioned
subsequent to the issuance of that notification. As admittedly, the appellants'
unit was commissioned several months before the second notification was made,
the second notification cannot afford a basis to the appellants to raise claim
for exemption for a period of 5 years from the date of the commissioning of
their plant.
Viewed from another perspective, it may be noticed that
the State Government was under no obligation to grant exemption from sales tax.
The appellants could not, therefore, have insisted on the State Government
granting exemption to them from payment of sales tax. What consequently follows
is that the exemption granted by the Government was only by way of concession.
Once this position emerges, it goes without saying that concession can be
withdrawn at any time and no time-limit can be insisted upon before the
concession is withdrawn. The notifications of the Government clearly manifest
that the State Government had earlier granted the exemption only by way of
concession and subsequently by means of the revised notification issued on July
17, 1971, the concession had been withdrawn. As the State Government was under
no obligation, in any manner known to law, to grant exemption, it was fully
within its powers to revoke the exemption by means of a subsequent notification.
This is an additional factor militating against the contentions of the
appellants.
Much of the arguments of the appellant's counsel proceeded
on the assumption that the appellants had acquired a vested right under the
notification issued by the Government on November 11, 1970, to claim exemption
from payment of sales tax for a period of five years and, consequently, the
Government had no right to take away the appellants' vested right. The
contentions are untenable because of the fallacy contained in them, viz., the
wrong assumption that the appellant had acquired a vested right. The High Court
has rightly repelled the plea that the appellants had acquired a vested right
and were, therefore, entitled to claim exemption from payment of tax for a
period of five years notwithstanding the revocation of the exemption under the
notification dated July 17, 1971. The High Court has further taken the view that
the earlier notifications granting exemption of tax only created existing rights
and such existing rights can always be withdrawn by means of a revocation
notification and that is exactly what has happened in this case.
For the purpose of this appeal, we do not think it
necessary to go into the question whether the earlier notification had created
existing rights and whether the impugned notification had the effect of only
taking away the existing rights. We are taking this view because we have already
pointed out that the State Government was under no obligation to grant exemption
and that the granting of tax exemption was only by way of concession. Having
regard to this conclusion, there is no need for any probe to be made to
determine whether the notification had created vested rights or only existing
rights. The exemption granted by the Government, as already stated, was only by
way of concession for encouraging entrepreneurs to start industries in rural and
undeveloped areas and, as such, it was always open to the State Government to
withdraw or revoke the concession. We must, however, observe that the power of
revocation or withdrawal would be subject to one limitation, viz., the power
cannot be exercised in violation of the rule of promissory estoppel. In other
words, the Government can withdraw an exemption granted by it earlier if such
withdrawal could be done without offending the rule of promissory estoppel and
depriving an industry entitled to claim exemption from payment of tax under the
said rule. If the Government grants exemption to a new industry and if on the
basis of the representation made by the Government an industry is established in
order to avail of the benefit of exemption, it may then follow that the new
industry can legitimately raise a grievance that the exemption could not be
withdrawn except by means of legislation having regard to the fact that
promissory estoppel cannot be claimed against a statute. In the present case,
the appellants had not raised the plea of promissory estoppel before the High
Court. This is understandable because the principle of promissory estoppel had
not found crystallised acceptance by courts of law when the Special Civil
Application came to be heard by the High Court in the year 1972. Be that as it
may, we find that the appellants have not made out any case of promissory
estoppel either on the basis of the averments made in their petition or with
reference to the facts which have emerged from the affidavits filed in the case.
In order to claim the benefit of promissory estoppel, the appellants must
establish :
(i) that a representation was made to grant the exemption
for particular period to a new industry established in view of the
representation held out by the State Government; and
(ii) that the appellants had established the new industry
acting upon the representation made by the State Government.
The facts in the present case do not go to establish that
the appellants had put up the new industry in question subsequent to and in
pursuance of the promise held out by a notification dated April 29, 1970,
granting exemption. Putting it differently, the appellants have not proved that
but for the concession offered in the first notification, they would not have
established the industry in question and that the entire venture was
attributable only to the inducement offered by the Government. From the facts
set out supra, it may be seen that the first notification was made on April 29,
1970, while the oil mill constructed by the appellants came to be commissioned
on May 17, 1970, itself. It is not the appellants' case and, indeed, it can
never be so contended that they launched the project and commenced the
construction of the oil mill only after the notification of April 24, 1970, was
made and that the entire construction was completed in about two weeks' time so
as to enable the appellants to commission the plant on May 17, 1970. What is
envisaged under the notification is that the project must have been undertaken
and construction work itself should have been started in response to and acting
on the notification. It is not sufficient to rely on the commissioning of an
industry after completion of construction work which had been commenced long
before the notification was made by the Government. In respect of such an
industry as the pre sent one, the issuance of a notification granting tax
exemption would only constitute a fortuitous circumstance and by no stretch of
imagination can it ever be said that the commissioning of the industry was
directly the outcome of the Government's notification granting tax exemption.
The concession offered by the Government under the first notification dated
April 29, 1970, did not prescribe any period or time-limit, and hence the
appellants cannot claim anything more than the benefit of the notification for
such period the exemption was in force. Once the Government decided, in exercise
of the powers vested in it, to revoke the original notification, the benefit of
exemption from sales tax enjoyed by the appellants came to an automatic end. The
period of five years mentioned in the second notification will have no reference
to the appellants' oil mill commissioned much earlier because the notification
had only prospective effect. We have, therefore, to affirm the view of the High
Court that the appellants will be entitled to the benefit of tax exemption only
for the limited period during which the concession was offered by the
Government.
We find no merit in the appeal and accordingly it stands
dismissed. No order as to costs.
Appeal dismissed
