M/S JSW CEMENT LIMITED,JAJPUR vs STATE OF ODISHA

Court
Odisha High Court

WP(C)/36871/2020
ODHC010781632020
2026:OHC:213-DB
IN THE HIGH COURT OF ORISSA AT CUTTACK

W.P.(C) No.36871 of 2020
CNR No. ODHC010781632020
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).



M/S JSW Cement Limited, Jajpur &
Anr.
…. Petitioner (s)
-versus-

State of Odisha & Ors. …. Opposite Party (s)




Advocates appeared in the case through Hybrid Mode :

For Petitioner (s) : Mr. Surya Prasad Mishra, Senior Advocate
Along with
Ms. Pami Rath, Senior Advocate
assisted by
Ms. Chitta Ranjan Dash, Advocate

For Opposite Party (s) : Mr. Satyabrata Mohanty, AGA
Mr. Surya Kanta Padhy, Senior Advocate
for O.P. No.4




CORAM:
HON’BLE DR. JUSTICE SANJEEB K PANIGRAHI
HON’BLE MR. JUSTICE MURAHARI SRI RAMAN



DATE OF HEARING:-07.10.2026
DATE OF JUDGMENT:-16.10.2026


Dr. Sanjeeb K Panigrahi, J.

1. The present Writ Petition calls in question the validity of the
amendment introduced by the Industries Department, Government of
Odisha, by Resolution dated 18.8.2020, whereby cement manufacturing
and grinding units were excluded from the benefit of reimbursement
of net State Goods and Services Tax (SGST) under Clause 5.4.5(a) of the
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Industrial Policy Resolution, 2015 (hereinafter referred to as “IPR
2015”), with retrospective effect from 1.07.2017. The petitioners contend
that the amendment withdraws an incentive which formed part of the
policy framework under which they altered their position, undertook
substantial investment, established the industrial unit and proceeded
to commence commercial production. They also question the failure of
the authorities to recognise their provisional Priority Sector status,
despite the application having been inspected and forwarded by the
Regional Industries Centre (RIC).
I. FACTUAL MATRIX OF THE CASE :

2. The Government of Odisha introduced IPR 2015 on 24.8.2015 with the
object of promoting industrial development in the State through a
framework of incentives and facilitation for eligible industrial units.
Among the incentives contemplated under the policy was
reimbursement of tax to eligible units falling within the “Priority
Sector”, subject to the prescribed conditions and operational guidelines.

3. The petitioners state that, acting upon the policy, they proceeded with
the establishment of a cement manufacturing unit in Odisha. The
proposal of the JSW group received in-principle approval of the State
Level Single Window Clearance Authority (SLSWCA) on 2.12.2015.
Thereafter, land was allotted by the Industrial Infrastructure
Development Corporation of Odisha (IDCO) on 22.1.2016 for the
proposed industrial project.

4. The petitioners assert that substantial investment was thereafter made
towards establishment of the unit. The first fixed capital investment is
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recorded as having been made on 31.7.2017. The petitioners have
referred to a total capital investment of approximately ₹ 350 crore in the
new unit and fixed capital investment of ₹ 167.78 crore. Their case is that
the investment was undertaken in furtherance of the industrial project
and in the expectation that the incentives available under IPR 2015
would govern the project, subject to fulfilment of the conditions
prescribed by the policy.
5. The Operational Guidelines for Grant of Priority Sector Status under
IPR 2015 prescribe a procedure for recognition of an eligible industrial
unit. During implementation of the project, an eligible unit may obtain
provisional Priority Sector status. Upon commencement of commercial
production, the unit may apply for recognition as a Priority Sector
industry in accordance with the prescribed procedure. The guidelines
also prescribe timelines for scrutiny and processing of the application
by the RIC and the Director of Industries.
6. On 16.8.2017, the petitioners submitted an application before the RIC
seeking provisional Priority Sector status. The application was
acknowledged on 21.8.2017, and the unit was inspected on 22.8.2017.
Following inspection, the RIC forwarded the application to the Director
of Industries on 22.9.2017 along with its inspection report and
certificate of verification.
7. The petitioners rely upon the verification undertaken by the RIC, which
recorded the date of the first investment, examined whether the unit
fell within the Negative List and recommended grant of provisional
Priority Sector status. According to the petitioners, the application had
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thus undergone the scrutiny contemplated by the guidelines and had
been forwarded to the authority responsible for issuing the certificate.
The petitioners maintain that no order rejecting the application was
communicated within the period prescribed under the guidelines.
8.
The petitioners also rely upon Section 11 of the Orissa Industries
(Facilitation) Act, 2004 (hereinafter referred to as “the Facilitation Act”),
which provides for deemed issuance of the requisite clearance where
the concerned Department or Authority fails to issue the same within
the prescribed period. Clause 4.2 of IPR 2015 is relied upon in support
of the applicability of the statutory facilitation framework to the grant
of industrial incentives. The petitioners contend that the failure to
decide their application within the prescribed time must be considered
in the light of these provisions.

9. The unit commenced commercial production on 1.5.2020. According to
the petitioners, production commenced within the period
contemplated under IPR 2015, reckoned from the date of the first fixed
capital investment.

10. In the meantime, the State Government issued the impugned
Resolution dated 18.8.2020 amending Clause 5.4.5(a) of IPR 2015. The
amendment substituted the earlier tax reimbursement framework with
reimbursement of net SGST but excluded cement manufacturing and
grinding units, blast furnace slag-based units and other specified
categories from the benefit. The amendment was made operative
retrospectively with effect from 1.7.2017.
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11. The petitioners contend that the retrospective date is material because
the first fixed capital investment had already been made and the
application for provisional Priority Sector status had been submitted
before the amendment was issued. The unit had also commenced
commercial production by that time. The petitioners further state that,
on 7.9.2020, IPICOL conveyed the in-principle approval of the SLSWCA
in relation to the additional investment for the expansion project.
12. The petitioners have also relied upon a communication issued by the
RIC on 27.5.2020. According to them, the communication recorded that
the application for provisional Priority Sector status had already been
forwarded to the Director of Industries and remained under
consideration. Certain additional documents and information,
including the date of commencement of production, were also sought.
The petitioners contend that this communication did not reject the
earlier application and cannot be treated as a decision within the period
prescribed under the guidelines.

13. The State has filed its counter affidavit opposing the writ petition. It
relies, inter alia , upon the proceedings of the High Level Committee
dated 24.1.2019, the decision of the Cabinet and the financial
implications associated with reimbursement of SGST following the
introduction of the Goods and Services Tax regime. The State maintains
that the policy could be modified in view of the financial burden upon
the exchequer and that the petitioners cannot claim the incentive
merely on the basis of an application or recommendation made by the
RIC.
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14. In their rejoinder, the petitioners dispute the State’s stand. They
maintain that the RIC inspected the unit, verified the relevant
particulars and forwarded the application with its recommendation;
that no rejection was communicated within the stipulated period and
that the subsequent request for additional documents could not cure
the earlier failure to decide the application. They also dispute the
contention that the unit falls within the Negative List and rely on the
inspection and verification undertaken by the RIC.
15. The controversy must be considered against this factual background.
The challenge to the retrospective amendment concerns the effect of a
subsequent policy decision upon an industrial project which had
already progressed under IPR 2015. The claim concerning provisional
Priority Sector status, on the other hand, turns upon the procedure
prescribed for processing the application, the failure to communicate a
decision within the stipulated period and the consequence, if any,
flowing from Section 11 of the Facilitation Act. The question of
reimbursement ultimately depends on the application of these findings
to the terms of the policy and the eligibility conditions applicable to the
unit.
II. SUBMISSIONS ON BEHALF OF THE PETITIONERS :
16. Learned Sr. Counsel for the petitioners submits that the Resolution
dated 18.8.2020 is arbitrary and unsustainable insofar as it excludes
cement manufacturing and grinding units from reimbursement of net
SGST with retrospective effect from 1.7.2017. The petitioners had
undertaken substantial investment under IPR 2015, obtained the
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requisite in-principle approvals, secured land, established the unit and
commenced commercial production. It is contended that the incentive
formed part of the policy framework under which the project was
undertaken and that its subsequent withdrawal for a period preceding
the date of the amendment defeats the legitimate expectation created
by the State’s own policy.

17. Learned Sr. Counsel distinguishes between the power of the State to
amend an industrial policy prospectively and the power to withdraw
an existing benefit retrospectively. It is submitted that the State may
alter the terms of its incentive scheme in accordance with law, but such
power cannot be exercised in a manner that arbitrarily deprives an
industrial unit of an incentive for a period during which the policy was
in force, particularly when the unit has already altered its position and
incurred substantial expenditure in reliance upon that policy.
18. Reliance is placed upon the judgment of this Court in Ultratech Cement
1
Limited and Another v. State of Odisha and Others . It is submitted
that the said judgment considered the Resolution dated 18.8.2020
insofar as it amended IPR 2007 and retrospectively excluded cement
units from the relevant tax reimbursement benefit. This Court rejected
the justification advanced for giving the amendment retrospective
effect and held that it could only operate prospectively. The petitioners
further point out that the judgment was affirmed by the Hon’ble

1

2022 SCC OnLine Ori 13
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2
Supreme Court vide order dated 14.10.2022 and thus Ultratech Cement
(supra) has attained finality.
19. According to the petitioners, the principle laid down in Ultratech
Cement applies with equal force to the impugned amendment of IPR
2015. Although the two cases concern different industrial policies, the
amendment challenged in both matters is the exactly the same
Resolution dated 18.8.2020, which seeks to exclude cement units from
a tax reimbursement incentive with retrospective effect. The petitioners
3
also rely upon M/s Maa Bhairabi Industries LLP v. State of Odisha ,
in support of their objection to the retrospective withdrawal of an
industrial incentive.

20. Learned counsel submits that the financial considerations relied upon
by the State may explain the decision to review the incentive scheme,
but do not, by themselves, justify applying the exclusion
retrospectively. The State was aware of the terms of IPR 2015 when the
project was approved and investment was undertaken. If a change in
fiscal circumstances warranted modification of the policy, the State
could amend it for the future. It could not, according to the petitioners,
use a subsequent amendment to defeat the very incentive for a period
during which the petitioners claim to have fulfilled the applicable
requirements.
21. On the question of provisional Priority Sector status, learned counsel
submits that the application dated 16.8.2017 was made in accordance

2

Order dated 14.10.2022 in SLP(C) Nos. 13756-13757 of 2022
3

W.P.(C) No. 5449 of 2018, decided on 13.07.2021
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with the Operational Guidelines. The RIC acknowledged the
application, inspected the unit and forwarded it to the Director of
Industries on 22.9.2017 with its inspection report and certificate of
verification. The petitioners rely upon the recommendation made by
the RIC and submit that the verification did not record any
disqualification under the Negative List.

22. It is contended that Clauses 6.1, 6.2, 7.1 and 8.1 of the Operational
Guidelines prescribe a time-bound procedure for processing
applications for Priority Sector status. The RIC is required to examine
and forward the application within the prescribed period, while the
Director of Industries is required to issue the certificate within the
stipulated time after receipt. The guidelines also contemplate
communication of rejection within the prescribed period. In the present
case, no rejection was communicated within that period, although the
application had already been forwarded by the RIC.
23. Learned counsel relies upon Section 11 of the Facilitation Act, read with
Clause 4.2 of IPR 2015, to submit that failure by the competent authority
to issue the requisite clearance within the prescribed period attracts the
statutory consequence of deemed issuance. It is argued that the
requirement of a subsequent written communication by the Nodal
Agency cannot be interpreted to mean that the statutory consequence
arises only if the defaulting authorities choose to acknowledge it. Such
an interpretation, according to the petitioners, would permit the
authorities to defeat the object of the legislation by their own inaction.
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24. The case is, therefore, not one where the entrepreneur failed to submit
an application or bypassed the prescribed procedure. The petitioners
participated in the inspection and awaited a decision from the
competent authority. They contend that the absence of a formal
certificate cannot be relied upon to defeat their claim when the
application remained undecided beyond the time stipulated under the
applicable framework.
25. The communication dated 27.5.2020 is also relied upon by the
petitioners. It is submitted that the communication acknowledged that
the application had been forwarded to the Director of Industries and
remained under consideration. The request for additional documents
and information did not amount to a rejection of the application. Nor,
according to the petitioners, could it revive a period which had already
expired or nullify the consequence claimed to have arisen from the
earlier failure to decide the application.
26. The petitioners also dispute the State’s reliance upon the Negative List.
They submit that the relevant entry, properly construed, does not
exclude their unit in the manner suggested by the State. According to
them, the entry concerning certain grinding or size-reducing units is
subject to the terms and qualifications contained therein, including the
investment threshold and the distinction relating to cement
manufacturing with clinker. The nature of the unit and the investment
involved, it is argued, take the petitioners outside the exclusion relied
upon by the State. Particular reliance is placed upon the RIC’s
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inspection and verification, which recorded that the unit did not fall
within the Negative List.
27. The petitioners invoke Articles 14, 19(1)(g) and 300A of the Constitution
of India. It is contended that retrospective withdrawal of the incentive,
in the circumstances of the present case, is arbitrary and adversely
affects the petitioners’ ability to carry on their industrial activity on the
terms under which the project was undertaken. Reliance is also placed
upon the principles of promissory estoppel and legitimate expectation,
with reference to the decision of the Hon’ble Supreme Court in MRF
4
Ltd. v. Assistant Commissioner (Assessment), Sales Tax .
28.
On the aforesaid grounds, the petitioner seeks quashing of the
impugned amendment insofar as it operates retrospectively against
their unit, a declaration that their application for provisional Priority
Sector status is to be treated in accordance with Section 11 of the
Facilitation Act and the applicable guidelines, and consequential relief
in respect of reimbursement of net SGST under IPR 2015.

III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:

29. Learned counsel appearing for the State opposes the writ petition and
submits that the impugned amendment is a policy decision taken by
the State Government in the exercise of its authority to determine the
nature and extent of fiscal incentives to be extended to industrial units.
It is contended that the State is not bound to continue a particular
incentive indefinitely and may modify its industrial policy in response

4

(2006) 8 SCC 702
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to changing economic circumstances and the financial implications of
the scheme.
30. It is submitted that the transition to the GST regime materially altered
the fiscal context in which the incentive was originally framed. The
Government was, therefore, entitled to review the policy and exclude
categories of units for which continuation of the reimbursement scheme
was considered financially unsustainable.
31. The State further relies upon paragraph 14(f) of IPR 2015 to contend
that the policy is capable of being reviewed or modified by the
Government. According to the State, an industrial policy is not an
immutable promise, and an entrepreneur cannot claim an indefeasible
right to the continuation of a fiscal incentive merely because the project
was undertaken while the policy was in force.

32. Learned counsel submits that the petitioners’ reliance upon Ultratech
Cement (supra) is misplaced. It is pointed out that the said case
concerned IPR 2007 and the circumstances of the industrial units
involved therein. In the present case, the petitioners did not possess a
final certificate recognising the unit as a Priority Sector industry when
the amendment dated 18.8.2020 was issued. The State accordingly
contends that the petitioners cannot equate their position with that of
an industrial unit whose entitlement had already been formally
recognised by the authorities.

33. The State disputes the contention that the petitioners had acquired an
enforceable right to reimbursement of SGST. It is argued that the
incentive was subject to the conditions contained in IPR 2015 and the
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applicable Operational Guidelines. Until the competent authority
granted the requisite Priority Sector status and the other conditions of
eligibility were verified, the petitioners could not claim reimbursement
as a matter of right.
34.
On the question of deemed approval, the State submits that the RIC’s
forwarding of the application to the Director of Industries was only an
intermediate step in the administrative process and did not amount to
a final decision granting Priority Sector status. The recommendation of
the RIC, according to the State, could not substitute the certificate
required to be issued by the competent authority. The application
remained subject to further consideration and verification, and no final
order granting the benefit had been issued.

35. The State also relies upon the communication dated 27.5.2020, under
which certain additional documents and information were sought from
the petitioners, including the date of commencement of commercial
production. According to the State, the requirement to furnish further
documents demonstrates that eligibility had not been finally
determined and that the authorities were entitled to seek information
before deciding the application.
36. The State disputes the petitioners’ interpretation of the Negative List
and maintains that the unit falls within the category of industrial units
excluded from the relevant incentive. It is submitted that the nature of
the industrial activity and the applicable policy provisions must be
examined before the benefit can be granted. The petitioners cannot,
according to the State, rely solely upon the RIC’s recommendation to
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avoid such scrutiny or claim a benefit contrary to the terms of the
policy.
37. The State, accordingly, submits that neither the retrospective
amendment nor the absence of a final Priority Sector certificate
warrants interference by this Court. It is submitted that the petitioners
have failed to establish an unconditional entitlement to reimbursement
and that the writ petition ought to be dismissed.
IV. REASONING AND JUDGMENT ANALYSIS OF THIS COURT :
38. Having considered the pleadings, the materials placed on record and
the submissions advanced on behalf of the parties, the following issues
arise for consideration:
A. Whether the amendment introduced by Resolution dated
18.8.2020, insofar as it retrospectively excludes cement
manufacturing and grinding units from the benefit of net SGST
reimbursement under IPR 2015 with effect from 1.7.2017, can
be sustained in the facts and circumstances of the present case.
B. Whether, having regard to Section 11 of the Facilitation Act,
Clause 4.2 of IPR 2015 and the Operational Guidelines for
Grant of Priority Sector Status, the petitioners’ application
dated 16.8.2017 attracts the consequence of deemed approval in
view of the failure of the authorities to decide it within the
prescribed period.
C. Whether the petitioners’ unit is liable to be treated as falling
within the Negative List and, consequently, whether the
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petitioners are entitled to consequential consideration and
grant of reimbursement of net SGST under IPR 2015.
A . Retrospective withdrawal of the incentive/ Doctrine of Promissory
Estoppel and Legitimate Expectation:
39.
The first issue concerns the retrospective operation of the Resolution
dated 18.8.2020. The State’s competence to frame an industrial policy
and to modify the incentives offered under it is not in dispute. Nor can
it be disputed that the Government may, in an appropriate case,
reconsider the financial terms of an incentive scheme in public interest.
The question is whether the decision to exclude a category of industrial
units could be made operative from a date preceding the amendment,
thereby affecting an industrial project which had already proceeded
under the existing policy.

40. The chronology assumes importance in this regard. IPR 2015 was
issued on 24.8.2015. The petitioners’ project received in-principle
approval on 2.12.2015, land was allotted on 22.1.2016, and the first fixed
capital investment is recorded as having been made on 31.7.2017. The
application for provisional Priority Sector status followed on 16.8.2017.
The unit thereafter proceeded towards establishment and commenced
commercial production on 1.5.2020. These events preceded the
Resolution dated 18.8.2020. The petitioners’ case is, therefore, founded
upon steps actually taken towards implementation of the industrial
project and not merely upon an intention to invest at some future point.

41. The State relies upon paragraph 14(f) of IPR 2015, which permits review
or modification of the policy. Such a provision recognises the
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Government’s authority to reconsider its industrial policy; it does not,
by itself, answer whether every amendment may be given retrospective
effect. The power to alter the policy framework and the power to
withdraw a benefit for a period preceding the amendment are distinct
questions. The latter must be examined with reference to the language
of the amendment, the nature of the incentive, the terms of the original
policy and the circumstances in which the industrial project was
undertaken.
42. The Resolution dated 18.8.2020 did not merely prescribe different
conditions for reimbursement in the future. It excluded the specified
categories of units with effect from 1.7.2017. The effect was to extend
the exclusion to a period commencing more than three years before the
Resolution was issued. An industrial unit which had acted upon IPR
2015 and incurred expenditure before the amendment could
consequently be deprived of the benefit for a period during which the
earlier policy governed the project. It is this retrospective consequence,
rather than the mere decision to alter the incentive, which requires
examination.

43. The State seeks to justify the amendment by reference to the financial
implications of reimbursement following the introduction of GST and
the decision taken by the Government after consideration at the
appropriate levels. These considerations may explain why the
Government decided to review the scheme. They do not, without
further justification, explain why the exclusion had to be imposed
retrospectively upon units which had already acted under the existing
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policy. The financial consequences of continuing an incentive and the
legality of withdrawing it for a past period are separate matters. The
former may support a policy change; it does not, by itself, resolve the
latter.
44.
In examining the retrospective operation of the amendment, this Court
must also consider the nature of the representation made through the
industrial policy and the extent to which the petitioners acted upon it.
45. The principal authority relied upon by the petitioners is the judgment
of this Court in Ultratech (supra). In that case, this Court examined the
Resolution dated 18.8.2020 insofar as it amended IPR 2007 by
retrospectively excluding cement units from the relevant tax
reimbursement benefit. The Court considered the justification
advanced by the State and rejected the retrospective operation of the
exclusion, holding that the amendment could operate prospectively
and could not be used to withdraw the benefit for the preceding period
in the manner sought by the State. The judgment was subsequently
affirmed by the Hon’ble Supreme Court.

46. The State is correct in pointing out that Ultratech Cement (supra)
concerned IPR 2007, whereas the present petition concerns IPR 2015.
The petitioners’ entitlement must, therefore, be determined under the
latter policy and the applicable guidelines. However, the distinction
between the two policies does not render the reasoning in Ultratech
Cement (supra) irrelevant. In both cases, the challenge concerns the
retrospective exclusion of cement units from a tax reimbursement
incentive through the self-same Resolution dated 18.8.2020. The
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principle emerging from that decision is directly relevant to the
question whether the State may apply the exclusion retrospectively to
a period during which an industrial unit had acted under the existing
policy.
47.
The absence of a final Priority Sector certificate on the date of the
amendment is a circumstance which must be considered, but it cannot
by itself determine the validity of the retrospective exclusion. The
petitioners’ case is that they applied for provisional status in August
2017, that the RIC inspected and verified the unit and forwarded the
application in September 2017 and that the competent authority did not
reject it within the prescribed period. Whether the petitioners can rely
upon deemed approval is a separate question to be considered under
Section 11 of the Facilitation Act. The State cannot dispose of the
challenge to retrospective operation merely by pointing to the absence
of a certificate without addressing the circumstances in which the
application remained pending.

48. Further, this is a fit case for governing the principle of promissory
estoppel. The principles governing promissory estoppel and legitimate
expectation, as explained by the Hon’ble Supreme Court in MRF Ltd.
v. Assistant Commissioner (Assessment), Sales Tax (supra), State of
5
Uttar Pradesh v. Birla Corporation Limited , Manuelsons Hotels Pvt.
6 7
Ltd. v. State of Kerela , State of Punjab v. Nestle India Ltd. , Motilal

5

(2019) SCC OnLine SC 1569
6

(2016) 6 SCC 766
7

(2004) 6 SCC 465
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8
Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh , are also
relevant. The doctrine does not prevent the Government from changing
its policy in the public interest or from exercising a lawful power to
modify an incentive scheme. At the same time, the Government cannot
disregard the consequences of a representation upon which a party has
acted merely by asserting that the representation formed part of a
policy capable of amendment. The nature of the representation, the
conduct of the party claiming its benefit and the justification for the
change must be considered together.
49. In the present case, the petitioners rely upon the approvals obtained for
the project, the allotment of land, the investment made, the application
for provisional Priority Sector status and the subsequent
commencement of commercial production. The State, on the other
hand, relies upon the financial consequences of the incentive scheme
and its power to review the policy. The financial considerations explain
the decision to modify the scheme, but the material placed before this
Court does not disclose a sufficient justification for applying the
exclusion retrospectively from 1.7.2017 to a project which had already
proceeded under IPR 2015. The position would have been different had
the amendment merely prescribed the terms governing incentives for
the future.
50. There is merit in the contention of the petitioners that there is no
justification given by the opposite parties as to why only cement
manufacturing/grinding units and blast furnace slag-based units have

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been chosen for denial of SGST reimbursement and that too with
retrospective effect, if in fact the idea was to revisit the incentive under
the IPR 2007 as a result of introduction of the GST regime. It will be
recalled that the GST regime was introduced in the country with effect
from 1.7.2017 whereas the retrospective amendment was made more
than three years later on 18.8.2020 and that too only for cement
manufacturing/grinding units and blast furnace slag-based units. In the
absence of a convincing justification provided, a move directed at only
a few industries for denial of SGST reimbursement can only be termed
irrational, arbitrary and discriminatory.

51. This court would first like to take up for discussion the decision of the
Supreme Court of India in MRF Ltd. v. Assistant Commissioner
(Assessment), Sales Tax (supra), which in the considered view of this
court is squarely applicable to the present case. It was held by the
Hon’ble Supreme Court in the said decision as under:
"32. State and its instrumentalities. .. can be made
subject to the equitable doctrine of promissory estoppel in
cases where because of their representation the party
claiming estoppel has changed its position and if such an
estoppel does not fly in the face of any statutory
prohibition, absence of power and authority of the
promisor and is otherwise not opposed to public interest,
and also when equity in favour of the promisee does not
outweigh equity in favour of the promisor entitling the
latter to legally get out of the promise.
…
34.. .. where a right has already accrued, for instance, the
right to exemption of tax for a fixed period and the
conditions for that exemption have been fulfilled, then the
withdrawal of the exemption during that fixed period
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cannot affect the already accrued right. Of course,
overriding public interest would prevail over a plea based
on promissory estoppel, but in the present case there is
not even a whisper of any overriding public interest or
equity.. .
…
39. MRF made a huge investment in the State of Kerala
under a promise held to it that it would be granted
exemption from payment of sales tax for a period of seven
years. It was granted the eligibility certificate. The
exemption order had also been passed. It is not open to or
permissible for the State Government to seek to deprive
MRF of the benefit of tax exemption in respect of its
substantial investment in expansion in respect of
compound rubber when the State Government had
enjoyed the benefit from the investment made by the MRF
in the form of industrial development in the State,
contribution to labour and employment and also a huge
benefit to the State exchequer.. . The impugned action on
the part of the State Government is highly unfair,
unreasonable, arbitrary and, therefore, the same is
violative of article 14 of the Constitution of India. The
action of the State cannot be permitted to operate if it is
arbitrary or unreasonable... Equity that arises in favour
of a party as a result of a representation made by the State
is founded on the basic concept of 'justice and fair play'.
The attempt to take away the said benefit of exemption
with effect from January 15, 1998 and thereby deprive
MRF of the benefit of exemption for more than five years
out of a total period of seven years, in our opinion, is
highly arbitrary, unjust and unreasonable and deserves
to be quashed. In any event, the State Government has no
power to make a retrospective amendment to SRO No.
1729/93 affecting rights already accrued to MRF
thereunder.
…
43.. .. Amendment notification SRO No. 38/98 (second
notification) has to be read so as not to take away or
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disturb any manufacture's pre-existing accrued right of
exemption for a period of seven years.. .' under first
notification
45. The State Government is restrained from initiating
any proceedings against MRF contrary to or inconsistent
with eligibility certificate and exemption order issued in
terms of first notification."

52. The excuse of financial implication does not stand scrutiny in view of
the observations of the Hon’ble Supreme Court in State of Uttar
9
Pradesh v. Birla Corporation Limited . The Hon’ble Supreme Court in
the said decision held as under:
"23.. .. the State Government or the executive is
competent to rescind the earlier notification and the
doctrine of promissory estoppel can be no impediment in
that behalf. That, however, is hedged or laced with
condition that the burden is upon the Government to
show that it acted in furtherance to public interest in
issuing such a
notification otherwise than in accordance with the
promise and that the public interest is so overwhelming
that it would be inequitable to hold the Government
bound by the promise. It is well established that the court
would not act on mere ipse dixit of the Government and
must insist on a highly rigorous standard of proof in
discharge of its burden by the Government. Resultantly,
it is not necessary for us to dilate on the precedents
pressed into service by the respondents on the
application of doctrine of promissory estoppel of the State
Government like any other private party or individual.
.. ..
25. The power to retrospectively withdraw a rebate or
concession must be expressly conferred upon the
executive, and in the absence thereof, it is not open to

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[2019] SCC OnLine SC 1569
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state to retrospectively withdraw or rescind such
benefits.
………………..
27.. .. all the industrial units set up after February 27,
1998 and before October 14, 2004 which had commenced
commercial production, must continue to qualify for
rebate for specified term mentioned in notification dated
February 27, 1998, subject to fulfilling all other
conditions specified therein.
.. ..
29.. .. It is also indisputable that the industrial units set
up in furtherance of the promise or representation made
in the notification dated February 27, 1998 which had
commenced commercial production in respect of
specified goods before October 14, 2004, would continue
to achieve the same objective as is specified in the
notification dated February 27, 1998. In that, the
concerned manufacturing units continue to
manufacture specified goods by using fly ash purchased
or produced from the thermal power stations situated
within the State. As long as that activity is continued
until the term specified under the notification dated
February 27, 1998, namely ten years from the date of
commencement of commercial production, there is no
tangible reason nor it is open to contend that the
dominant purpose underlying notification dated
February 27, 1998 had ceased to exist or had become
irrelevant in any manner, much less there are
supervening circumstances qua such units which are so
overwhelming that it would be inequitable for the State
Government to be bound by the promise given in
notification dated February 27, 1998.
30. Indeed, the judgment rendered by the High Court
and affirmed by this court in interpreting the
notification dated February 27, 1998, at best, may have
given rise to some logistical issues for the State including
financial implications regarding future revenue loss.
That ground cannot be invoked as supervening public
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interest in reference to the activities of the industrial
units who qualify the conditions specified in notification
dated February 27, 1998 in all other respects and had
commenced commercial production of the specified
product before October 14, 2004. Indubitably, an
enforceable right had accrued to and crystallised in
favour of such industrial units which could not be
truncated or snapped unless the dominant purpose for
which the notification dated February 27, 1998 came to
be issued had ceased to exist, namely, generation of fly
ash by the thermal power stations situated within the
State and consumption of that fly ash by the industrial
units established within the designated areas of the State
as per the specified quantity to become entitled for rebate
for the duration mentioned therein.. . Suffice it to observe
that the argument about future revenue loss cannot be
invoked against the industrial units who had already
established and commenced production after February
27, 1998 and before October 14, 2004. For, it can be
safely presumed that the policy makers were fully
conscious about the so-called loss of future revenue due
to rebate to those units when they had issued notification
dated February 27, 1998. That ground cannot be set up
against the industrial units who qualify in all other
respect under the notification dated February 27, 1998
and have made substantial investment running into
crores much less as being supervening public interest, as
is being placated by the State in these proceedings. This
is clearly an afterthought plea, which by no standards
can stand the test of judicial scrutiny. It is well
established that the court is obliged to insist for a highly
rigorous standard of proof in the discharge of the burden
and onus upon the State to justify its action as
supervening public interest."

53. In the present case, no material whatsoever has been placed on record
by the opposite parties to establish that the impugned resolution
retrospectively is in public interest. As already pointed out, there was
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no justification in arbitrarily singling out cement manufacturing units
for denial of the SGST reimbursement.
54. In the circumstances, the reasoning adopted by this Court in Ultratech
Cement (supra) squarely applies to the retrospective operation of the
impugned Resolution qua IPR 2015. The State was competent to review
its policy and prescribe the terms upon which incentives would be
available in the future, subject to law. It could not, however, by the
Resolution dated 18.8.2020, retrospectively exclude the petitioners’ unit
from the incentive for the period preceding the amendment, without
sufficient justification and without regard to the policy under which the
project had been undertaken. The retrospective operation of the
amendment, insofar as it is sought to be applied against the petitioners
for the period preceding 18.8.2020, cannot be sustained.
B . Deemed approval under the Facilitation Act and the Operational
Guidelines:
55. The next issue concerns the effect of the petitioners’ application dated
16.8.2017 for provisional Priority Sector status. The petitioners rely
upon Section 11 of the Facilitation Act, read with Clause 4.2 of IPR 2015
and the Operational Guidelines. The State contends that the forwarding
of the application by the RIC was only an intermediate administrative
step and that no status could arise without a final certificate from the
Director of Industries. The question is not whether the RIC’s
recommendation itself constituted a final certificate, but whether the
failure of the competent authority to decide the application within the
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prescribed period attracts the statutory consequence as has been
claimed by the petitioners.
56. Section 11 of the Orissa Industries (Facilitation) Act, 2004 (hereinafter
referred to as the “Facilitation Act”) provides for a time-bound process
for issuance of clearances by the concerned Department or Authority.
Under sub-section (1), where a clearance required under the applicable
law is not issued within the specified period, the clearance is “deemed
to have been issued” and the entrepreneur may proceed with the
project. Sub-section (2) provides for continuation of such deemed
approval until formal clearance is issued. Sub-section (3) contemplates
written communication by the Nodal Agency to the entrepreneur, with
a copy to the concerned Department or Authority, informing the
entrepreneur of the deemed approval. The provision must be read as a
whole, having regard to its object of preventing delay on the part of the
authorities from indefinitely obstructing an industrial project.
57. The statutory scheme proceeds on the basis that an application covered
by the provision must be dealt with within the prescribed period. The
consequence contemplated by sub-section (1) is not merely an
administrative reminder to the concerned authority; there is a coercive
consequence attached by the statute in case of failure to issue the
requisite clearance within time. The requirement of communication
under sub-section (3) serves the purpose of informing the entrepreneur
and the concerned Department or Authority of the deemed approval.
It cannot be read in isolation from sub-section (1) so as to permit the
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consequence expressly contemplated by the statute to be defeated
solely because the authorities failed to communicate it.
58. This does not mean that every application which remains unanswered
must automatically be treated as approved, irrespective of the nature of
the application or the governing statutory provisions. The consequence
of deemed approval can arise only if the application is covered by
Section 11, the prescribed procedure has been followed and the relevant
period has expired without the required decision. The applicability of
the provision must, therefore, be determined on the facts of each case
and with reference to the procedure prescribed under the Operational
Guidelines.

59. Clause 4.2 of IPR 2015 provides the relevant connection between the
policy and the statutory facilitation framework. The Operational
Guidelines for Grant of Priority Sector Status prescribe the procedure
by which an application is to be examined and processed. Clauses 6.1,
6.2, 7.1 and 8.1, read together, contemplate scrutiny by the RIC,
forwarding of the application to the Director of Industries, issuance of
the certificate within the prescribed time and communication of
rejection within the stipulated period. The process is thus subject to
defined timelines and does not contemplate that an application may
remain pending indefinitely without a decision.
60. The record shows that the petitioners submitted their application on
16.8.2017 and that it was acknowledged on 21.8.2017. The unit was
inspected on 22.8.2017. Thereafter, on 22.9.2017, the RIC forwarded the
application to the Director of Industries along with its inspection report
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and certificate of verification. The application had, therefore,
progressed beyond the stage of initial receipt and had undergone
inspection and verification by the authority entrusted with scrutiny.
61. The contents of the RIC’s verification are also relevant. The report
recorded (a) the date of the first investment, (b)examined whether the
unit fell within the Negative List and (c) recommended provisional
Priority Sector status. The petitioners are not relying merely upon an
acknowledgment of receipt or an unverified assertion of eligibility.
They rely upon the inspection undertaken and the recommendation
made by the authority after examining the relevant particulars. The
application was thereafter forwarded to the Director of Industries, who
was required to act in accordance with the applicable guidelines.

62. No order rejecting the application within the prescribed period has
been shown to have been communicated to the petitioners. The State
relies upon a communication dated 27.5.2020, which stated that the
application had been forwarded to the Director of Industries, it
remained under consideration and some further documents were
sought. The communication does not, on its terms, constitute a rejection
of the application. It instead indicates that the application remained
pending for more than three years after it had been forwarded by the
RIC.
63. The request for additional documents in May 2020 cannot, by itself, be
treated as a timely rejection of an application submitted in August 2017.
If the authorities considered the application deficient or the unit
ineligible, it was incumbent upon them to take an appropriate decision
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in accordance with the applicable procedure. Nor does the material
referred to by the State demonstrate that the earlier application was
rejected before the communication dated 27.5.2020.
64. The State’s contention that the RIC’s recommendation did not itself
constitute a final certificate is correct to the limited extent that a
recommendation and a certificate are distinct administrative acts. The
petitioners’ case, however, does not rest solely upon treating the
recommendation as equivalent to a final certificate. It rests upon the
statutory consequence claimed to have arisen because the application
was submitted in accordance with the prescribed procedure, was
inspected and forwarded to the competent authority, and was not
rejected within the prescribed period. The absence of a final certificate
must be examined in that context.

65. If the requirement of a formal certificate were treated as conclusive in
every case, notwithstanding the expiry of the prescribed period, the
protection afforded by the deemed-approval provision could be
rendered nugatory. An authority could avoid the consequence of its
default simply by withholding the formal certificate indefinitely. Such
an interpretation would be difficult to reconcile with the object of the
Facilitation Act, which seeks to ensure that industrial projects are not
left indefinitely awaiting action from the concerned authorities. The
provision must, however, be applied only to the extent that the
particular application and the clearance sought are covered by its
terms.
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66. The subsequent conduct of the petitioners is also consistent with their
case that they continued to pursue the prescribed procedure. They
participated in the inspection, their application was forwarded with the
verification report, and they informed the RIC of the commencement of
commercial production by communication dated 27.7.2020. The
chronology does not disclose an abandonment of the earlier application
or a failure to invoke the prescribed procedure on the part of the
petitioners.
67. At the same time, deemed approval of the application for provisional
Priority Sector status does not dispense with every requirement
governing the subsequent grant and quantification of reimbursement.
The conditions relating to the commencement of production, the
relevant investment, the applicable period and ceiling, and the other
requirements of IPR 2015 continue to govern the incentive. The
statutory consequence claimed by the petitioners addresses the failure
to decide the provisional-status application within time; it does not, by
itself, determine the amount of SGST reimbursement payable.

68. In the present case, on the material placed before this Court, the
petitioners have made out a case for application of the statutory
consequence under Section 11 of the Facilitation Act, read with Clause
4.2 of IPR 2015 and the applicable Operational Guidelines.
69. This Court is, therefore, of the view that the petitioners are entitled to
the benefit of deemed approval in respect of their application dated
16.8.2017 for provisional Priority Sector status in terms of terms of
Section 11 of the Facilitation Act and the relevant guidelines. This
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finding concerns the provisional-status application and the
consequences of the failure to decide it within the prescribed period.
C . The Negative List and consequential entitlement to SGST
reimbursement:
70.
The State has further contended that the petitioners’ unit falls within
the Negative List and is, therefore, not entitled to the incentive. The
petitioners dispute this position and rely upon the relevant entry in the
Negative List, the nature of their manufacturing activity and the RIC’s
verification report. This issue must be examined independently, since
neither the retrospective invalidity of the amendment nor the
consequence of deemed approval can confer an incentive upon an
industrial unit which is otherwise excluded by the applicable policy.

71. The contention of the Opposite Parties that the Petitioners’ unit falls
within Sl. No. 36 of the Negative List under IPR 2015 cannot be accepted
on the material placed before this Court. The said entry excludes size
reducing, size separating, grinding and mixing units having
investment in plant and machinery of less than ₹ 10 crore, while
expressly excepting the manufacture of cement with clinker. The entry
must be applied having regard to both the nature of the industrial
activity and the investment threshold prescribed therein.
72. In the present case, the Petitioners show that the investment made in
plant and machinery exceeds the prescribed threshold and that the
manufacturing process involves the use of clinker, fly ash and blast
furnace slag as principal raw materials. They further rely upon Clause
15.18 of IPR 2015, under which their industrial activity is stated to fall
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within the Priority Sector. These circumstances are material to the
determination of whether the unit is covered by the exclusion contained
in Sl. No. 36.
73. Significantly, the certificate of verification issued by the RIC records
that the first fixed capital investment was made on 31.7.2017, that the
unit does not fall within the Negative List under IPR 2015, and that it
may be declared a Priority Sector industrial unit for which provisional
status may be granted. The verification was undertaken by the
authority entrusted with the initial scrutiny of the application. While
the recommendation of the RIC is not, by itself, conclusive of the
Petitioners’ ultimate entitlement to the incentive, its findings cannot be
brushed aside without examining the nature of the manufacturing
activity, the investment in plant and machinery and the terms of the
relevant entry.
74. In these circumstances, the Opposite Parties were required to
demonstrate, with reference to the applicable entry and the particulars
of the Petitioners’ unit, the basis on which the exclusion was sought to
be applied. A mere reference to the fact that the Petitioners’ unit is
engaged in cement manufacturing or grinding does not, by itself,
establish that it falls within Sl. No. 36.
75. On the material placed before this Court, no sufficient basis has been
demonstrated for disregarding the RIC’s verification and treating the
unit as categorically excluded from the benefit of IPR 2015. The
objection founded upon the Negative List, therefore, cannot be
sustained as a ground for denying consideration of the Petitioners’
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claim for Priority Sector status and consequential reimbursement,
subject to fulfilment of the other applicable conditions.
76. The findings on the retrospective amendment and deemed approval
must now be considered together. The amendment dated 18.8.2020
cannot be applied retrospectively to exclude the petitioners’ unit from
the incentive for the period preceding the date of the Resolution.
Further, the petitioners’ application for provisional Priority Sector
status attracts the consequence of deemed approval on the facts and
material discussed above. The State cannot, therefore, rely upon the
retrospective exclusion or the absence of a formal provisional certificate
to deny consideration of the subsequent application and the claim
arising therefrom.

77. Clause 5.4.5(a) of IPR 2015 and the applicable Operational Guidelines
prescribe the nature and extent of the incentive. The benefit available to
eligible industrial units in the Priority Sector is subject to the specified
period, the ceiling linked to the cost of plant and machinery and the
other conditions contained in the policy. The amount payable must
accordingly be determined by reference to the net SGST eligible for
reimbursement and the limits prescribed under the applicable
provisions.
78. The petitioners have also invoked Articles 14, 19(1)(g) and 300A of the
Constitution. In view of the conclusions reached on the retrospective
operation of the amendment, the application of Section 11 of the
Facilitation Act and the objection founded upon the Negative List.
From the aforesaid discussion it is clear that the arbitrary exclusion of
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cement manufacturing and grinding units is arbitrary and
unconstitutional. The consequential claim must be dealt with under the
applicable policy, taking account of the findings recorded above.
79. Accordingly, the petitioners are entitled to consideration of their claim
for reimbursement of net SGST under IPR 2015, subject to verification
of the amount actually payable and compliance with the applicable
conditions governing the incentive. The authorities shall not reopen the
question of deemed provisional status or deny the claim solely on the
ground that no formal certificate was issued before the amendment
dated 18.8.2020.
CONCLUSION
V. :

80. For all of the aforementioned reasons, the Writ Petition is accordingly
allowed. The petitioners shall be treated as having obtained deemed
approval of their application dated 16.8.2017 in line with the terms of
the applicable policy and the findings recorded in this judgment
81. The Petitioner’s claims with regard to SGST reimbursement under
Clause 5.4.5 (a) of IPR 2015 stood accrued and crystallized. The
amendment Resolution dated 18.08.2020 insofar as it prescribes
retrospective exclusion of cement manufacturing and grinding units
from SGST reimbursement w.e.f. 1.07.2017 is held to be arbitrary,
unconstitutional and contrary to the doctrine of promissory estoppel
and legitimate expectation. Resultantly, this Court sets aside the
impugned Resolution dated 18.8.2020 retrospectively amending IPR
2015.
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82. This Court consequently directs that the claim of the Petitioner for
reimbursement of SGST in accordance with IPR 2015 along with
applicable interest shall be determined and released within four weeks.
83. Ordered accordingly. There shall be no order as to costs.
84.
Interim order, if any, passed earlier stands vacated.


(Dr. Sanjeeb K Panigrahi)
Judge

Murahari Sri Raman, J.- I agree


(Murahari Sri Raman)
Judge
Orissa High Court, Cuttack,
th

Dated the 16 October, 2026/-



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