Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3940 OF 2008
[Arising out of SLP (Civil) No. 23809 of 2005]
Tamil Nadu Electricity Board & Anr. …Appellants
Versus
Status Spinning Mills Ltd. & Anr. …Respondents
WITH
CIVIL APPEAL NOs.
3941,3942,3943,3944,3945,3946,3947,3948,3949,3950,3951,3952,3953,
3954,3955,3956,3957,3958,3959,3960,3961,3962,3963,3964,3965,3966,
3967,3968,3969,3970,3971,3972,3973,3974,3975,3976,3978,3979,3980,
3981,3982,3983,3984,3985,3986,3987,3988,3989,3990,3990,3991,3992,
3993,3994,3995,3996,3997,3998,3999,4000,4001,4002,4003,4004,4005,
4006,4007,4008,4009,4010,4011,4012,4013,4014,4015,4017,4018,4019,
4020,4021,4023,4024-4033,4036,4035,4034,4037,4038-4041,4042,
4043,4044-51, 4052,4054,4055,4056,4057,4058,4060,4061, 4062,4063,
4064,4065,4066,4067-71,4072,4073,4075,4076,4077,4078,4080,
4081,4083,4084 OF 2008
[Arising out of SLP (Civil) Nos. 26309, 26387, 26382, 26368, 26345,
26355, 26372, 26366, 26378 of 2005, SLP(Civil) Nos. 2026, 1942, 1941,
1954, 1949, 1951, 1953, 1944, 1930, 1946, 1938, 1947, 1950, 1932, 1945,
1428, 1952, 1935, 1927, 1937, 1955, 1948, 1940, 1919, 1925, 1933, 2242,
2246, 2287, 2286, 2285, 2282, 2279, 2276, 2273, 2274, 2249, 2253, 2255,
2281, 2252, 2254, 2257, 2258, 2268, 2264, 2269, 4278, 4280, 4281, 4282,
4283, 4284, 4285, 4286, 4287, 4288, 4289, 4290, 4291, 4292, 6660, 6724,
6757, 6763, 6761, 6767, 6765, 18803, 18804 to 18818, 21338, 21340 to
21343, 21347, 21348, 21350 to 21357, 16509, 16510, 21723, 21600,
21604, 21602, 21605, 21616, 21613, 21631, 21633, 21608, 5299, 5300 to
5303, 4108, 4109, 4111, 21681, 21682, 21683 of 2006, SLP (Civil) Nos.
2385, 2387, 2388, 2391 of 2007)
J U D G M E N T
S.B. SINHA, J :
2
1. Leave granted.
2. These appeals at the instance of the Tamil Nadu Electricity Board (for
short “the Board”) and State of Tamil Nadu are directed against a judgment
and order dated 19.07.2005 passed by a Division Bench of the Madras High
Court dismissing the writ appeals filed by the appellants herein arising out
of a judgment and order dated 23.04.1999 passed by a learned Single Judge
of the said Court.
3. The basic fact of the matter is not in dispute.
4. The State of Tamil Nadu despite the Parliamentary enactment of the
Electricity (Supply) Act, 1948 (for short “the 1948 Act”) enacted the Tamil
Nadu Revision of Tariff Rates on Supply of Electrical Energy Act, 1978 (for
short “the 1978 Act”); the relevant provisions whereof are as under:
“3. Tariff rates for consumption of electrical
energy
Not-withstanding anything contained in the Tamil
Nadu Essential Articles Control and
Requisitioning (Temporary Powers) Act, 1949
(Tamil Nadu Act XXIX of 1949), the tariff rates
payable to the Tamil Nadu Electricity Board by
any consumer on the electrical energy supplied by
the Board shall be as specified in the Schedule to
this Act.
3
4. Power of the State Government to amend
the Schedule -
The State Government may after taking into
account the Cost of production of energy, and such
other matters as may be prescribed by notification,
amend the provisions of the Schedule to this Act.”
5. Pursuant thereto and in furtherance thereof, High Tension Supply
tariff was prescribed. The State issued a G.O. bearing No. G.O.Ms No. 29
dated 31.01.1995 providing for tariff concession for High Tension
industries; the relevant portions whereof are as under:
“a) In the case of new High Tension Industries
to be set up in the areas other than the Madras
Metropolitan areas, the following concessional
tariffs shall be charged for the first three years
from the date, the consumer is given service
connection under high tension tariff –I-
For the first year 60 per cent of the
High Tension rates.
For the second year 70 per cent of the
High Tension rates.
For the third year 80 per cent of the
High Tension rates.
For the fourth year Full Tariff.
The above concession shall apply to both
unit rates and maximum demand chares. This
concession shall not however, be applicable to an
rd
industry set up before the 3 May, 1989. The
concession shall not also be applicable to a
consumer, who utilizes power from his own
generating units or makes other arrangements for
4
production purposes and utilizes the power
supplied by the Board for auxillary purposes
only.”
6. A memorandum was issued on or about 23.08.1995 to specify the
time limit required for dealing with the applications for grant of electrical
connections as and when applications therefor are filed which are in the
following terms:
“Adverting to the above, the following further
instructions are issued regarding disposal of H.T.
applications.
i) The Superintending Engineers of all Elecy.
Dist. Circle are requested to bestow their
efforts and thrive for clearing pending
applications wherever possible.
ii) The delays in processing the H.t.
applications should be strictly avoided at all
stages. The revised flow chart showing the
various stages of processing of the H.T.
applications is enclosed.
iii) While scrutinizing the applications the
defects observed in the application may be
conveyed to the applicants at the first
instance itself and not on piece meal with a
view to speed up the disposal.
iv) It is further to be reiterated that those H.T.
applications for which supply could not be
extended within 18 months may be returned
immediately to the applications with a
request to renew after a specific date.
5
v) If supply could be extended to applicants
within 18 months but requires enhancement
of transformer capacity, improvement of
existing lines etc., the load sanction may be
accorded pending execution of such
improvement works stipulating the above
conditions.
Depending on the readiness reported and also
based on the merits of the each case of H.T.
extension, supply may be effected to H.T.
applicants using the powers delegated to the Chief
Engineers (Distribution) vide
memo.no.SE/IEMC/EE3/AEE1/802/91 dated
8.11.91.
All Superintending Engineers/Elecy. Distn. Circle
are once again informed to ensure that delays do
not occur beyond a reasonable time for processing
the H.T. applications as H.T. services constitute
major source of revenue for the Board and to
bestow all efforts to achieve the target fixed for
the year 95-96 without fail.”
7. The flow chart annexed thereto specified the maximum period of 18
months’ time to be taken from the date of filing of the application till the
date of grant of connection.
8. The G.O. dated 31.01.1995 was amended on 14.02.1997 in the
following terms:
“H.T. Tariff – I
6
There is increase in both demands and
energy charges.
For consumption of energy during peak
hours viz. 6.00 AM to 9.00 AM and 6.00 PM to
9.00 PM, the energy charges are to be billed at
20% extra. This will be implemented on
installation of ‘Time of Day’ meters.
New industries set up on or after 15.2.97 are
not eligible for any tariff concession. However, in
respect of H.T. industries set up in areas other than
Chennai Metropolitan area before 15.2.97 shall
continue to avail the tariff concession until the
expiry of 3 years period reckoned from date of
service concession.”
By a G.O. issued on 14.02.1997, the Schedule appended to the 1978
Act was amended as under:
“(a) New High Tension Industries set up in
th
any area on or after 15 February 1997, shall not
be eligible for tariff concession:
Provided that the High Tension Industries
set up in any area other than Chennai Metropolitan
th
area before 15 February 1997 shall continue to
avail themselves of the said tariff concession until
the expiry of the period of three years from the
date on which the consumer is given service
connection.
(b) New industry to be set up in the areas
other than the Chennai Metropolitan area which
will work night shift only and existing industry
which has only night shift between 9.30 p.m. of a
day and 5.30 a.m. of the next day, shall be given a
concession of 40 per cent of the appropriate rate
for energy consumed during night shift only for a
7
period of seven months from July to January
during a period of five years from the date of
giving service concession. This concession shall
apply to energy rate arrived at after fixing the
concession if any:
Provided that in respect of those having one
day shift and one night shift, the night shift
concession shall stand reduced from 40 per cent to
20 per cent.”
9. By a letter dated 1.08.1997 addressed to the Chairman of the Board,
the State Government purported to clarify the meaning of the word “set up”,
stating:
“I am to state that the words “set up” would mean
“obtained service connection”. The “New High
th
Tension Industries set up in any area or after 15
February, 1997 would mean new High Tension
Industries for which power service connection was
actually extended on or after 15.2.97.”
10. Questioning the validity of the said notification dated 14.02.1997 as
also the letter dated 1.08.1997, a large number of writ applications were
filed contending that the same was barred under the doctrine of promissory
estoppel. Writ petitions were also filed contending that the petitioners had
set up their industries before 14.02.1997 and they were entitled to the
benefit of tariff concession in terms of the proviso appended to Clause (a) of
8
High Tension Tariff – I. By a judgment and order dated 23.04.1999, a
learned Single Judge of the High Court disposed of the said batch of writ
applications directing:
a) Writ petitions which challenged the validity of the Notification
dated 14.2.1997 withdrawing the concessions were dismissed.
b) Those petitioners who had informed the Electricity Board on or
before 14.2.1997 about their readiness for getting power
connection or made applications to the Board would be entitled
to enjoy the tariff concessions for the full period of three years,
from the date of power connection as stipulated in the
Notification dated 31.1.1995.
c)
Those writ petitioners who had not made applications or sent
intimation to the Electricity Board regarding their readiness to
got power connection on or before 14.2.97 but have altered
their position by establishing the industry on or before 14.2.97
would be entitled to the tariff concessions as stipulated in the
Notification dated 31.1.95 “provided if they are able to
nd
establish the same before the 2 respondent – Electricity
Board.
11. Appeals were preferred thereagainst both by the Board and the State
Government. Some of the industries who have challenged the notification
on the plea of applicability of the doctrine of promissory estoppel also
preferred appeals. Indisputably, during pendency of the said appeals before
the Division Bench of the High Court, the Schedule to the 1978 Act was
further amended by a notification dated 7.01.2000 whereby and whereunder
the following Explanations were added:
9
“ Explanation 1 . – For the purpose of this clause,
an industry may be considered to be set up on the
date of obtaining High Tension Service
Connection.
Explanation 2. – For the purpose of this clause
“Existing Industry” means an industry, which has
not completed five years from the date, the
consumer is given service connection and which is
still eligible to the concessional tariff rate.”
12. The Division Bench of the High Court disposing of the said batch of
appeals by a judgment and order dated 19.07.2005 opined that it was not
necessary to discuss the individual fact of each of the respondents’ case on
the premise that the Secretary to the Government could not clarify the
amendments to the Schedule which were made by the Governor. The said
appeals were disposed of holding:
i) “…In the present case, the meaning of the words “set up is clear.
These words mean “erect or establish”, as pointed out by the
Supreme Court. If the high tension industry has been erected or
established before 15.02.1997, then it is entitled to the benefit of
the tariff concession, even though electricity connection may not
have been given to it prior to 15.02.1997.
ii) We do not agree that it is the date on which the application for
electricity supply is received by the electricity board that is the
relevant date. An application can be made even before setting up
the industry or it can be made after setting up the industry, but that
is wholly irrelevant. It is the date when the industry has been set
up that is the relevant date.
10
iii) We also do not agree that where the industries have not been set
up, but are in the process of being set up, yet, the benefit of the
concession will be available, on the basis of the principle of
promissory estoppel. There is no question of promissory estoppel
because the language of the Notification is very clear and there is
no estoppel against a Statute.”
13. It is, thus, evident that two points were determined against the
respondents. No appeal has been preferred therefrom by the industries in
question.
14. The core questions which arise for our consideration are as under:
i) What is the connotation of the expression “set up” in the context
of the concessional tariff granted in favour of High Tension
Industries for the first three years “from the date, the consumer is
given service connection?.
ii) Whether the expression “set up” appearing in the proviso to clause
(a) of High Tension Tariff would have to be construed in the
context of the expression “shall continue to avail themselves of the
said tariff concession” appearing in the proviso?
11
iii) Whether the expression “set up” would also takes its colour from
the context that the continued tariff concession could be availed by
the High Tension Industries “until the expiry of the period of three
years from the date on which the consumer is given service
connection.?
iv) Whether the expression “set up” be not construed to ensure
certainty amongst the consumers who could continue to avail of
the tariff concession and whether the date on which the consumer
is given a service connection provides such certainty?
v) Whether the Notification conferring tariff concessions could be
construed liberally to extend the benefit thereof by construction of
the expression “set up” and by introducing the element of
uncertainty?
15. Mr. A.K. Ganguly, learned senior counsel appearing on behalf of the
appellants would submit that the State of Tamil Nadu intended to confer
benefit on a class of people. Such classes of people having been identified
as consumers of High Tension Electrical Energy, it was permissible for the
State not only to fix a cut-off date but also to specify the same so as to
enable the industries to take the benefit only from the date when they start
consuming electrical energy. It was, however, submitted that there can be
12
some exceptional cases where despite filing of applications for grant of
electrical connection, there had been some avoidable delays on the part of
the Board.
It was urged that for the purpose of grant of benefit of concession in
tariff rate, the Board must know who the beneficiaries were.
The learned counsel further submitted that the Division Bench of the
High Court committed a serious error insofar as it failed to take into
consideration that a High Tension industry gets ready to discharge the
functions for which it was set up, only with certain formalities as provided
for in the Indian Electricity Act, 1910 (for short “the 1910 Act”) and the
Rules framed thereunder, viz, the Indian Electricity Rules, 1956 (for short
“the 1956 Rules”) are complied with. An industry starts functioning,
according to the learned counsel, only when it is ready to operationalise its
machinery which can only be done when the power connection is granted.
One of the essential pre-requisite therefor is certification and approval by
the Inspector in terms of Section 37 of the 1910 Act and Rule 63 of the
1956 Rules.
The said Rule reads as under:
13
“63. Approval by Inspector.--
(1) Before making an application to the Inspector
for permission to commence or recommence
supply after an installation has been disconnected
for one year and above at high or extra-high
voltage to any person, the supplier shall ensure
that the high or extra-high voltage electric supply
lines or apparatus belonging to him are placed in
position, properly joined and duly completed and
examined. The supply of energy shall not be
commenced by the supplier unless and until the
Inspector is satisfied that the provisions of rules
65 to 69 both inclusive have been complied with
and the approval in writing of the Inspector has
been obtained by him:
Provided that the supplier may energise the
aforesaid electric supply lines or apparatus for the
purpose of tests specified in rule 65…”
Compliance of Rule 63 of the 1956 Rules, Mr. Ganguly submitted, is
a definite parameter to assess the readiness of industry to discharge the
functions for which it had been set up. The Government letter dated
1.08.1997 being clarificatory in nature, the same should be given effect to.
It was furthermore contended that the subsequent notification dated
7.01.2000 whereby two Explanations were introduced is also clarificatory in
nature as a bare perusal of Explanation 1 would demonstrate that it merely
clarified what was inhered/ implied in the said proviso which also reflects
14
the undertaking of the government which alone was competent to grant
exemptions to concerned industries and/ or to withdraw or modify the same.
It was urged that the operative part of the order of the Division Bench
should be suitably modified to reflect that the setting up of an industry prior
to 15.02.1997 implies that such industry was ready to discharge all the
functions for which it had been set up and that it has already become a
consumer having obtained High Tension service connection from
15.02.1997 and only those industries which have been set up before
15.02.1997 shall continue to avail themselves of the said tariff concession
until the expiry of the period of three years from the date on which the
consumer is given a service connection.
16. Mr. K. Parasaran and Mr. S. Ganesh, learned senior counsel and other
learned counsel appearing on behalf of some of the respondents, on the
other hand, would contend that the amendments to the Schedule carried out
by the notification are unreasonable being in contravention of the statute.
The word “set up” having been interpreted by this Court in Commissioner
of Wealth Tax v. Ramaraju Surgical Cotton Mills, Ltd. [1967 (1) SCR 761]
which in turn having been followed in Kabini Minerals (P) Ltd. and another
v. State of Orissa and others [(2006) 1 SCC 54], it must be held that the said
15
word is in contra-distinction of the word “commence”. Some of the High
Tension industries having already set up their business and having gone for
commercial production by reason of generators, it cannot be said that they
had not been set up. For the said purpose, not only the doctrine of
promissory estoppel should be applied, the wordings of the Section should
be read down to mean that those industries are entitled to the tariff
concession who were not only granted connection but who ought to have
been granted connection.
It was pointed out that in most of the cases, not only the entrepreneurs
altered their position pursuant to or in furtherance of the promise made by
the State in terms of the notification dated 31.01.1995. They had applied
for grant of communication much prior to the cut off date fixed by the
notification dated 14.02.1997. The entrepreneurs who had acted pursuant to
the promise made by the State should not be allowed to suffer for no fault
on their part.
17. The learned counsel in most of these matters have drawn our attention
to the factual matrix involved in each of the cases to contend that it is the
Board and/or the State who is responsible for delay in granting electric
energy. They have not only set up the industry and ready for commercial
production but, in fact, some of them, pursuant to or in furtherance of the
16
permission granted by the State Electricity Board in terms of the provisions
of the Indian Electricity Rules, 1956 had set up diesel generating sets for the
purpose of running the factory which even stands accepted by the Board.
It was urged that although no appeals have been preferred from the
judgment of the Division Bench of the High Court, this Court in exercise of
its jurisdiction under Order 41, Rule 33 of the Code of Civil Procedure may
permit the respondents to raise the said contention. Reliance in this behalf
has been placed on UCO Bank v. Rajinder Lal Cooper [(2007) 6 SCC 694].
18. The High Court unfortunately did not go into the fact of each case. It
proceeded on the basis that the word “set up” should be given its dictionary
meaning, i.e., erect or establish in view of a decision of this Court in
Ramaraju Surgical Cotton Mills Ltd (supra). The effect for a clarificatory
order has also not been considered stating that the Secretary of the
Government cannot clarify an amendment to the Schedule which has been
made by the Governor.
19. We wish that the Division Bench would have bestowed serious
considerations on the issues, as has been done by the learned Single Judge.
17
20. The validity of the 1978 Act is not in question. It overrides the
provisions of the 1948 Act. It empowered the State Government to amend
the provisions contained in the Schedule to the Act prescribing tariff rates
payable by different classes of consumers for supply of electrical energy by
the Board taking into account the cost of production of energy and such
other matters as may be prescribed by notification. Indisputably, the
Schedule appended to the Act had been amended from time to time. The
notification dated 31.01.1995 was issued amending the Schedule. It for all
intent and purport substituted the then existing Schedule; Part A thereof
dealt with tariff for High Tension supply. It is only in that notification some
concession, as noticed hereinbefore, had been granted. The concession was
to apply to both unit rates and maximum demand charges. Certain
limitations for grant of the said concession had also been specified.
21. The Schedule was amended by the notification dated 14.02.1997
reflecting the operation of grant of concession tariff to those who had set up
the new High Tension industries on or after 15.02.1997. What is, therefore,
significant for our purpose is the meaning of the word “set up” vis-à-vis
“commencement”.
18
22. A word cannot be assigned a meaning in vacuum. It has to be read in
the context in which it has been used. A decision which has been rendered
on a different act dealing with a different subject matter may not be apposite
while construing the same term in another statute. We may, however, at the
outset notice the decision of this Court in Ramaraju Surgical Cotton Mills,
Ltd. (supra) wherein this Court in the context of interpretation of Section 5
(1)(xxi) of the Wealth Tax Act held:
“…A unit cannot be said to have been set up
unless it is ready to discharge the function for
which it is being set up. It is only when the unit
has been put into such a shape that it can start
functioning as a business or a manufacturing
organisation that it can be said that the unit has
been set up...”
The decision centered round an exemption provision in respect of a
portion of net wealth of a company established with the object of carrying
on an industrial undertaking in India, as is employed by it in a new and
separate unit set up after the commencement of the Act. Although different
terms “setting up” and “commencement” were used, this Court opined that
the word “set up” is equivalent to the word “established” and that a business
is established when it “is ready to commence business”. It was furthermore
19
opined that an establishment could not be set up to be ready to commence
business if it not “set up”.
The said view was reiterated by this Court in Kabini Minerals (P) Ltd.
(supra) stating:
“9. The expression “setting up” means, as is
defined in the Oxford English Dictionary , “to
place on foot” or “to establish”, and is in
contradistinction to “commence”. The distinction
is this that when a business is established and is
ready to commence business, only then it can be
said of that business that it is set up. But before it
is ready to commence business it is not set up.
(See CWT v. Ramaraju Surgical Cotton Mills Ltd. )
10. In the said case, it was further held that the
word “set up” is equivalent to the word
“established” but operations for establishment
cannot be equated with the establishment of the
unit itself of ( sic or) its setting up.”
23. What is necessary to take into consideration is that the Schedule
appended to Section 3 of the 1978 Act is a part of the Act. It provides for
High Tension tariff. It fixes up cut-off dates. It is a piece of subordinate
legislation. A subordinate legislation validly made may have to be read in
the same manner as if it is a part of the Act. For the said purpose, although
the same would be amenable to constitutional challenge on well-settled
principles of law, as noticed by this Court in Bombay Dyeing & Mfg. Co.
20
Ltd. (3) v. Bombay Environmental Action Group and Others [(2006) 3 SCC
434], Vasu Dev Singh and Others v. Union of India and Others [(2006) 12
SCC 753] and State of Kerala and Others v. Unni and Another [(2007) 2
SCC 365], the validity thereof is not under challenge.
24. The notification dated 31.01.1995 postulated concession to the new
High Tension industries “to be set up” for the first three years from the date
the consumer is given a service connection. It did not speak of
commencement of production. It intended to attain a certainty as to from
which date such concession would be available. Grant of service
connection was considered to be a pre-requisite for grant of the concession.
It is in the aforementioned context, the impugned amendment will have to
be construed. It fixes a cut off date beyond which the concession shall not
be available to the industries, viz., those who had set up in any area on or
after 15.02.1997.
25. The proviso appended thereto, however, saves the cases of those who
had availed themselves of the said tariff concession and they who would
continue to get the benefit thereof until expiry of the period of three years
from the date on which the consumer is given service connection. The date
on which the service connection is given, therefore, plays an important role.
21
The clarification issued by the State during pendency of the appeals
should have, therefore, been considered by the High Court in its proper
perspective. If it is clarificatory in nature, it could be given a retrospective
operation. Such a question, however, should have been posed and
answered. Furthermore, the letter dated 1.08.1997 was issued as some
confusion arose. When a subordinate legislation is made by the State
Government, it must be done in terms of the constitutional provision. An
executive order is also issued keeping in view the rules and executive
business. It may not have the force of law but the same may come within
the purview of the well-known principle of contemporaneous exposito .
Rules of executive construction are also relevant.
26. The Government placed the entire record before the learned Single
Judge. In his judgment, the learned Single Judge recorded :
“14. The learned Senior Counsel has produced
the note file of the Government. From the file, I
am able to see that the Chairman, Electricity Board
himself while constructing the said expression ‘set
up’ has stated that ‘withdrawal of tariff concession
to the industries set up with respect to the
industries during 1994 the date of load sanction
was taken into account’. The Chairman has also
recommended to the effect that tariff concession
which prevailed prior to 14.2.1997 can be
extended to consumers who have informed
22
readiness on or before 14.2.1997 and certified as
such all Field Superintending Engineers on
inspection of the industry after receipt of readiness
report, and after 15.2.1997, due to the reason that
it was not informed prior to 14.2.1997.”
27. It does not appear that the Chief Secretary of the State had issued the
letter in question upon following the procedure laid down in the Rules of
Executive Business framed under Article 166 of the Constitution of India.
We are, however, not much concerned therewith. It is not a case where the
opinion of the Chief Secretary and/or for that matter the State was decisive.
In the matter of interpretation of statute, the Court has the last say.
We have, therefore, to consider the issues raised before us
independently.
28. Furthermore, concession is to be given in respect of payment of the
charges for electrical energy. When can it be given would be a question of
fact. When it has been given would be known to everybody. The bills are
required to be paid only after electrical energy is consumed. Question of
availing the benefit of concession would not arise unless a service
connection is granted. For the said purpose, the definition of consumer, as
contained in Section 2(1)(c) of the 1910 Act would be relevant. The benefit
can be availed by the consumer keeping in view the nature of concession
23
granted. Exemption notifications, therefore, require construction depending
upon the tenor of the statute/ notification. Whether it should undergo a
strict construction or a liberal construction is one thing but it is another
thing that whether a person is entitled to concession on a plain reading of
the notification.
It may be true that the exemption notification should receive a strict
construction as has been held by this Court in Novopan India Ltd. Hyderabd
v. Collector of Central Excise and Customs, Hyderabad [1994 Supp. (3)
S.C.C. 606], but it is also true that once it is found that the industry is
entitled to the benefit of exemption notification, it would receive a broad
construction. [See Tata Iron & Steel Co. Ltd. v. State of Jharkhand (2005) 4
SCC 272 and A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala (2007) 2
SCC 725].
A notification granting exemption can be withdrawn in public
interest. What would be the public interest would, however, depend upon
the facts of each case.
29. In State of Jharkhand v. Tata Cummins Ltd. [(2006) 4 SCC 57], this
Court held:
“6. Before analysing the above policy read with
the notifications, it is important to bear in mind the
connotation of the word “tax”. A tax is a payment
24
for raising general revenue. It is a burden. It is
based on the principle of ability or capacity to pay.
It is a manifestation of the taxing power of the
State. An exemption from payment of tax under an
enactment is an exemption from the tax liability.
Therefore, every such exemption notification has
to be read strictly. However, when an assessee is
promised with a tax exemption for setting up an
industry in the backward area as a term of the
industrial policy, we have to read the
implementing notifications in the context of the
industrial policy. In such a case, the exemption
notifications have to be read liberally keeping in
mind the objects envisaged by the industrial policy
and not in a strict sense as in the case of
exemptions from tax liability under the taxing
statute.”
30. The word “set up”, therefore, was also required to be construed
keeping in view the provisions of the statute operating in the field, viz., the
1910 Act, the 1948 Act and the 1956 Rules.
31. Validity of the notifications on the ground they are unreasonable has
not been raised before the High Court. We, therefore, cannot go into the
issue. If that be so, it is difficult to agree with Mr. Parasaran that we should
undertake an exercise to interpret the notifications in a manner which would
not lead to unreasonableness. For the purpose of declaring a statute
unconstitutional, foundational facts have to be laid therefor. [See M/s.
Seema Silk & Sarees & Anr. v. Directorate of Enforcement & Ors. Criminal
25
th
Appeal @ SLP (Crl.) No. 6812 of 2007 decided on 12 May, 2008].
Grounds are required to be raised therefor. In absence thereof it would not
be possible for us to enter into the debate of constitutionality of the said
provisions. The Division Bench of the High Court had rightly or wrongly
opined that the doctrine of promissory estoppel has no application. The fact
that the said doctrine may apply even in relation to a statute is beyond any
dispute as has been held by this Court in Mahabir Vegetable Oils (P) Ltd.
and Another v. State of Haryana and Others [(2006) 3 SCC 620], A.P. Steel
Re-Rolling Mill Ltd. (supra), Pawan Alloys and Casting Pvt. Ltd. v. U.P.
State Electricity Board and others [(1997) 7 SCC 251] and Southern
Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO and
Others [(2007) 5 SCC 447]
32. Strong reliance has been placed by Mr. Parasarn on Shah v. Shah
[2002 Q.B. 35 : (2001) 4 All ER 138] to contend that the doctrine of
promissory estoppel is applicable even in the field of the statute. Therein, it
was held:
“In the Godden case [1997] NPC 1 an attempt was
made to defeat by an estoppel the provision in
section 2(1) of the 1989 Act that "a contract for
the sale or other disposition of an interest in land
can only be made in writing and only by
incorporating all the terms which the parties have
expressly agreed in one document or, where
26
contracts are being exchanged, in each". Simon
Brown LJ stated that the argument that "although
Parliament has dictated that a contract involving
the disposition of land made otherwise than in
compliance with section 2 is void, the defendants
are not allowed to say so" was "an impossible
argument". Simon Brown LJ regarded the
principle stated in Halsbury's Laws as a "cardinal
rule" the "absolute nature" of which cannot be
"outflanked by one of the equitable techniques or
types of estoppels sought to be deployed in the
present case". Thorpe LJ and Sir John Balcombe
agreed with Simon Brown LJ.
Yaxley v Gotts [2000] Ch 162 was also concerned
with section 2 of the 1989 Act. An oral agreement
purporting to grant an interest in land, though void
and unenforceable under section 2, was held still
to be enforceable on the basis of a constructive
trust under section 2(5) which provides that
"nothing in this section affects the creation or
operation of resulting, implied or constructive
trusts". Robert Walker LJ stated, at p 175:
"Parliament's requirement that any contract for the
disposition of an interest in land must be made in a
particular documentary form, and will otherwise
be void, does not have such an obviously social
aim as statutory provisions relating to contracts by
or with moneylenders, infants, or protected
tenants. Nevertheless it can be seen as embodying
Parliament's conclusion, in the general public
interest, that the need for certainty as to the
formation of contracts of this type must in general
outweigh the disappointment of those who make
informal bargains in ignorance of the statutory
requirement. If an estoppel would have the effect
of enforcing a void contract and subverting
Parliament's purpose it may have to yield to the
statutory law which confronts it, except so far as
the statute's saving for a constructive trust
27
provides a means of reconciliation of the apparent
conflict."
Clarke LJ stated, at p 182, that where a particular
estoppel relied upon would offend the public
policy behind a statute it is necessary to consider
the mischief at which the statute is directed.
Where a statute had been enacted as the result of
the recommendations of the Law Commission it
44* is appropriate to consider those
recommendations. He stated that in his opinion:
"the contents of that report [Transfer of Land:
Formalities for Contracts of Sale etc of Land
(1987) (Law Com No 164)] will be of the greatest
assistance in deciding whether or not the
principles of particular types of estoppel should be
held to be contrary to the public policy underlying
the Act. In this regard it seems to me that the
answer is likely to depend upon the facts of the
particular case."
Beldam LJ stated, at p 191, that "The general
principle that a party cannot rely on an estoppel in
the face of a statute depends upon the nature of the
enactment, the purpose of the provision and the
social policy behind it."
The said decision has also been referred to Actionstrength Ltd.
(trading as Vital Resources) v. International Glass Engineering IN.GL.EN
SpA and another [2003 (2) All. E.R. 615 at 619], but therein it was held
that the doctrine of promissory estoppel may not be applicable in case of a
statute. As would appear from the discussions hereinafter, applicability of
the said doctrine would depend upon various factors including the nature
28
and purport of the Statute, the object it seeks to achieve, the purpose for
grant of concession/exemption etc.
33. It, therefore, depends on the nature of the statute as also applicability
of the doctrine. As noticed hereinbefore, even such a question had not been
raised before the High Court.
34. The GOMs dated 31.01.1995 granted concession for the new high
tension industries to be set up. The eligibility for grant of concession
therefore was for the industries which were to be set up after the said date.
The exemption does not stop at that. It is given a retrospective effect. It is
extended to those industries which were set up after 3.05.1989. However,
exception therefor is sought to be curved out in respect of those industries
who had been utilizing power from their own generating units or making
other arrangements for production for the purposes and utilizing the power
supplied by the Board in auxiliary purposes only. The said notification,
therefore is a broad based one. It not only is to apply to those industries
which were to be set up on or from 31.01.1995 but also to those which were
set up after 3.05.1989.
We may notice that concessional tariffs, however, were to be granted
only for three years. Those three years of concessional tariffs, therefore,
29
were available to any industry which had been set up after 3.01.1989 till the
concession is withdrawn. Unlike other notifications, no period is fixed.
This Court, in a number of decisions, has considered the effect of the
notifications which were applicable for a fixed period, may be three years or
five years. The concession, although was to apply for a period of three
years both in respect of unit as also maximum demand charges, the same
was meant to be applied to all those industries who intended to set up their
industries in the areas other than Madras Metropolitan areas.
Indisputably, the respondents before us have started setting up their
industries after the said date. It is on the aforementioned backdrop, the
impugned notification dated 14.02.1997 requires interpretation. Those who
had set up their industries have acquired a right, viz. the right to obtain the
tariff concession once a right is accrued in their favour. What was promised
to them was that they would be granted the tariff concession for a period of
three years @ 60%, 70% and 80% of the consumption charges.
35. Whether by reason of the said notification dated 14.02.1997, an
accrued or vested right has been taken away or not is the question. The core
question, therefore, is as to whether by reason of the said notification dated
31.01.1995, the entrepreneurs who had set up new high tension industries
after the said date have acquired any right pursuant thereto.
30
The notification dated 31.01.1995 must be interpreted in a broad
based manner, as a promise was made to grant the concessional tariff not
only for the new industries which were to be set up thereafter but also to the
pre-existing industries. The right accrued to them is sought to be taken
away w.e.f. 15.02.1997. Those who were eligible upto 14.02.1997 to avail
the benefit of the notification dated 31.01.1995 became ineligible. It is in
the aforementioned context, the proviso appended to clause (a) is required
to be interpreted. It has used the term ‘set up’ in any area other than
Chennai Metropolitan area before 15.02.1997. Should the rule of liberal
interpretation be applied? In our opinion, it should not be. An accrued
right ordinarily cannot be taken away with retrospective effect. It is not a
case where the notification has a retroactive operation. A person may apply
on a particular date for grant of electrical connection. He may get the
electrical connection within a few days or a few weeks or a few months.
According to the State Electricity Board, keeping in view the role played by
all the three players, namely, the consumer, the Board and the State, an
outer limit of 18 months is taken for grant of supply.
36. There are cases before us wherefrom it appears that electrical
connections had not been provided owing to default on the part of the
Electrical Inspector who is an officer of the State and/or authorities of the
31
Board, although prompt action had been taken in the matter of depositing of
money and/or complying with directions by the consumers.
37. A statute, even a subordinate legislation, may have to be construed
reasonably. A subordinate legislation ordinarily would not be given a
retrospective effect. Retrospective effect can be granted only if there exists
any power in that behalf. There is nothing to show that such a power has
been conferred upon the State in terms of the Act. While saying so, we are
not oblivious of the situation that the State has a statutory power to fix the
tariff. It may also be true that when a statutory power is conferred, the State
would have power to amend, alter, modify or rescind the same. The Court
must also bear in mind that it may not cause undue hardship. What we
mean to say that if construction of a statute is possible as a result of
hardship is avoided, vis-à-vis, an undue hardship would be created, the
court will prefer the former interpretation. The proviso is an exception to
th
the main clause whereas all industries which were set up on or after 15
February become wholly ineligible for any tariff concession but those who
had set up prior thereto shall continue to avail themselves of the said tariff
concession. Legally, those who had not become consumer of electrical
energy, but were the potential consumers, they had not only applied for it
but they were and, in fact, some of them has also been gone into commercial
32
production. Once they have set up the high tension industries and who had
gone up for commercial production must be held to have set up the high
tension industries. Once they have set up the high tension industries after
st
31 March, 1995, they became entitled to the benefit of concessional tariff
for a period three years. Such concession was to be availed by them from
the date of grant of service connection. If they had already been granted
service connection, they would continue to avail themselves of the said
tariff concession. However, the difficulty arises only in cases where despite
applying for grant of electrical communication, actual service connection
had not been granted. If a literal interpretation of the proviso is taken
recourse to, the same may result in an anomaly in the sense that in one case,
connection may be granted in one day and in another case, connection may
not be granted for a long time. Because of the acts of discrimination on the
part of the officers of the Board or the State, the entrepreneurs would suffer.
It is in the aforementioned limited sense, the doctrine of promissory
estoppel will have application. If doctrine of promissory estoppel applies,
the right accrued in terms thereof cannot be withdrawn with a retrospective
effect. [See Mahabir Vegetable Oils (P) Ltd. (supra) Southern
Petrochemical Industries Co. Ltd. (supra)]
33
38. In MRF Ltd., Kottayam v. Asstt. Commissioner (Assessment) Sales
Tax and others [(2006) 8 SCC 702], this Court held :
“In any event, the appeal preferred by the State of
Kerala was dismissed and the judgment of the
High Court has therefore become final.
Accordingly, it was held that Section 10(3) does
not confer the power to withdraw an exemption
with retrospective effect. Effect of this is that the
amendment Notification SRO No. 38/98 has to be
read so as not to take away or disturb any
manufacturer’s pre-existing accrued right of
exemption for a period of 7 years. If SRO No.
38/98 is construed as now contended by the
respondent, then the inevitable consequence would
be that SRO No. 38/98 would itself be rendered
ultra vires Section 10(3) of the Act, and therefore,
illegal, bad in law and null and void.”
39. Yet again, in Tata Teleservices Ltd. v. Commissioner of Customs
[(2006) 1 SCC 746], this Court held:
“10. We are of the view that the reasoning of
the Bombay Bench of the Tribunal as well as that
of the Andhra Pradesh High Court must be
affirmed and the decision of the Delhi Tribunal set
aside insofar as it relates to the eligibility of LSP
340 to the benefit of the exemption notification.
The Andhra Pradesh High Court was correct in
coming to the conclusion that the Board had, in
the impugned circular, predetermined the issue of
common parlance that was a matter of evidence
and should have been left to the Department to
establish before the adjudicating authorities. The
Bombay Bench was also correct in its conclusion
34
that the circular sought to impose a limitation on
the exemption notification which the exemption
notification itself did not provide. It was not open
to the Board to whittle down the exemption
notification in such a manner. The exemption
notification merely reproduced the language of
Entry 8525 20 17 and since the exemption
notification merely reproduced the tariff entry, the
limitation sought to be imposed by the Board
would tantamount also to reading the limitation
into the classification itself.”
40. In State of Orissa and Others v. Tata Sponge Iron Ltd. [(2007) 8 SCC
189], this Court held:
“20. In view of the clear legal provision as also
the aforementioned Notification dated 23-9-1992,
there cannot be any doubt whatsoever that the
exemption in respect of deferment of sales tax
having been provided for under the Orissa Sales
Tax Act as also the notification issued thereunder,
the High Court, in our opinion, is correct in taking
its view.”
41. In State of Kerala and Others v. Kurian Abraham (P) Ltd. and
Another [(2008) 3 SCC 582], it was opined :
“23. Tax administration is a complex
subject. It consists of several aspects. The
Government needs to strike a balance in the
imposition of tax between collection of revenue on
one hand and business-friendly approach on the
other hand. Today, Governments have realized
that in matters of tax collection, difficulties faced
35
by the business have got to be taken into account.
Exemption, undoubtedly, is a matter of policy.
Interpretation of an Entry is undoubtedly a quasi-
judicial function under the tax laws. Imposition of
taxes consists of liability, quantification of
liability and collection of taxes. Policy decisions
have to be taken by the Government. However, the
Government has to work through its senior
officers in the matter of difficulties which the
business may face, particularly in matters of tax
administration. That is where the role of the Board
of Revenue comes into play. The said Board takes
administrative decisions, which includes the
authority to grant Administrative Reliefs. This is
the underlying reason for empowering the Board
to issue orders, instructions and directions to the
officers under it.”
42. It is not a case where decisions were altered pursuant to any
representation made by the State. Concessions in tariff had been granted by
reason of a statutory provision. Such concessions could also be withdrawn.
If the appellants have not altered their position pursuant to any promise, the
doctrine of promissory estoppel would not apply. If that be so, the question
of any right being vested in the appellants would also not apply. In any
event, the reasonableness of the statute was not the subject matter of the
writ petition. The provisions have not been sought to be declared ultra
vires. Even otherwise, the State while amending statute stated about the
public interest necessitated the same. When a statute is amended keeping in
36
view the public interest even the concession can be withdrawn with
retrospective effect.
43. In Kasinka Trading & Anr. v. Union of India & Anr. [(1995) 1 SCC
274], the power of the State to change its policy decision in public interest
was emphasized. It was held that the power which can be used for grant of
concession, namely, Section 25(1) of the Customs Act itself is the source to
rescind the earlier notification, stating :
“Since, the notification had been issued under
Section 25(1) of the Act, the very same power was
available to the authority for rescinding or
modifying that notification and appellant ought to
have known that the said notification was capable
of or liable to be revoked, modified or rescinded at
any time even before the expiry of 31.3.1981 if the
‘public interest’ so demanded. To hold that after
the Government had issued the Notification No.66
of 1979 indicating that it was to remain operative
till 31.3.1981, it could not be rescinded or
modified before the expiry of that date would
amount to prohibiting the Government from
discharging its statutory obligation under Section
25(1) of the Act, if it was satisfied that it was in
the ‘public interest’ to withdraw, modify or
rescind the earlier notification. The plain
language of Section 25 of the Act is indicative of
the position that it is the public interest and public
interest alone which is the dominant factor. It is
not the case of the appellants that the withdrawal
of Notification No.66 of 1979 by the impugned
notification was not in ‘public interest’. Their
case, however, is that relying upon the earlier
37
notifications they had acted and the Government
should not be permitted to go back on its
assurance as otherwise they would be put to huge
loss. The courts have to balance the equities
between the parties and indeed the courts would
bind the Government by its promise ‘to prevent
manifest injustice or fraud’.”
It was further held :
“ 23. The appellants appear to be under the
impression that even if, in the altered market
conditions the continuance of the exemption may
not have been justified, yet, Government was
bound to continue it to give extra profit to them.
That certainly was not the object with which the
notification had been issued. The withdrawal of
exemption “in public interest” is a matter of policy
and the courts would not bind the Government to
its policy decisions for all times to come,
irrespective of the satisfaction of the Government
that a change in the policy was necessary in the
“public interest”. The courts, do not interfere with
the fiscal policy where the Government acts in
“public interest” and neither any fraud or lack of
bona fides is alleged much less established. The
Government has to be left free to determine the
priorities in the matter of utilisation of finances
and to act in the public interest while issuing or
modifying or withdrawing an exemption
notification under Section 25(1) of the Act.”
Kasinka Trading (supra) has been followed in many cases including,
Shrijee Sales Corporation & Anr. v. Union of India [(1997) 3 SCC 398],
Bannari Amman Sugars Ltd. v. Commercial Tax Officer & Ors. [(2005) 1
38
SCC 625], Kuldeep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702],
M.P. Mathur & Ors. v. DTC & Ors. [(2006) 13 SCC 706] and Ramchandra
Murarilal Bhattad & Ors. v. State of Maharashtra & Ors. [(2007) 2 SCC
588].
44. A distinction must be made between a policy decision and a statute.
Whereas prima facie a policy decision may not have any retroactive
operation, a statute may have. Only because it affects a past transaction the
same, by itself, would not come in the way of the legislature in enacting an
enactment or the executive government to exercise its power of subordinate
legislation.
45. We have noticed hereinbefore that some of the industries had even
installed generators. They had to do it. They inevitably had to do it because
the Board would not supply power. Would it not be too much to contend
that even those industries have not been set up as they have not become
consumers? We think that for the said purpose, the proviso has to be read
down. It must be made applicable to them who not only had started
commercial production before the said date, namely, 14.02.1997 but also
had applied and were otherwise ready to take electrical connections having
deposited the amount asked for.
39
46. Those hard cases, even according to Mr. Ganguly, should be brought
within the purview of the proviso.
We, therefore, hold:
1. As the concession had been granted by the State, it had the
power to withdraw the same.
2. It is not a case where in view of the doctrine of promissory
estoppel, the State could not have in law amended the
Schedule.
3. In view of existence of public interest the doctrine of
promissory estoppel would have no application.
4. Even otherwise the appellants having not preferred appeals
against the judgment of the Division bench of the High Court,
the said questions cannot be permitted to be raised before us.
5. Proviso appended to the main provision should be read down
as stated in paragraphs 44 and 45 supra.
6. In view of our findings aforementioned, we have not gone into
the merit of the matter involved in each case separately.
40
We direct accordingly. The matters would now be examined by the
Appropriate Authority of the Board, as directed by the High Court in
individual cases. The appeals are allowed with the aforementioned
directions. No costs.
………………………….J.
[S.B. Sinha]
..…………………………J.
[Lokeshwar Singh Panta]
New Delhi;
May 16, 2008