Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1579 OF 2019
State of Uttar Pradesh & Anr. … Appellant(s)
Versus
M/s. Birla Corporation Limited … Respondent(s)
WITH
CIVIL APPEAL NO.1580 OF 2019
J U D G M E N T
A.M. Khanwilkar, J.
The seminal question involved in both these appeals is about
1.
the power of the State to rescind the notification providing for
rebate in respect of tax payable under the Uttar Pradesh Trade Tax
Act, 1948 (for short, “the 1948 Act”) and thus withdrawing the
facility even in respect of industrial units, which had commenced
Signature Not Verified
Digitally signed by
CHARANJEET KAUR
Date: 2019.11.20
18:03:33 IST
Reason:
production and had complied with the conditions for grant of such
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rebate in terms of Notification dated 27 February, 1998.
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Briefly stated, the appropriate authority, in exercise of power
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under Section 5 of the 1948 Act issued notification dated 18 June,
1997, to declare the goods having fly ash contents of 10% or more
by weight to be notified goods for the purpose of Section 5, and to
grant a rebate of 25% in respect of the goods having fly ash
contents between 10 to 30% by weight and a rebate of 50% in
respect of the goods having fly ash contents exceeding 30% by
weight on the tax levied under the Act in the districts notified
thereunder. In due course, the feedback received by the
Government was that neither any new industrial unit was
established within the State nor the consumption of the fly ash had
increased by the existing units. Resultantly, there was no extra
disposal/consumption of fly ash which was being produced by the
thermal power stations situated within the State of Uttar Pradesh.
In other words, the avowed objective for issuing the notification to
extend rebate did not fructify. In light of such feedback, the
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appropriate authority issued fresh notification dated 27 February,
1998 bearing No.T.I.F2592/XI9(226)94U.P.Act1548Order98
to rescind the earlier notification and instead to grant a rebate of
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25% in respect of the goods having fly ash contents between 10% to
30% by weight and a rebate of 50% in respect of the goods having
fly ash contents exceeding 30% by weight on the tax levied under
the Act in the districts mentioned thereunder, subject to certain
conditions. The said notification reads thus:
“[S. No. 1289]
Notification No.T.I.F – 2592/XI9(226)94U.P. Act
1548Order98, dated 27.02.1998
Whereas, the State Government is satisfied that
it is expedient in the public interest so to do:
Now, therefore, in exercise of the powers under
Section 5 of the Uttar Pradesh Trade Tax Act, 1948
(U.P. Act No. XV of 1948), read with section 21 of the
Uttar Pradesh General Clauses Act, 1904 (U.P. Act
No.1 of 1904), the Governor, with effect from March 1,
1998 is pleased:
(a) to rescind the Notification No.TT21885/XI
9(226)/94UPAct1548 Order97, dated June 18,
1997;
(b) to grant a rebate of twenty five percent on goods
having flyash contents between ten to thirty percent
by weight and a rebate of fifty percent on the goods
having flyash contents exceeding thirty percent by
weight on the tax levied under the Act in the district
mentioned in column2 Annexure given below for the
period mentioned in column3 of the said Annexure
subject to the following condition:
CONDITIONS
(i) such goods shall be manufactured in a unit
established in the area mentioned in coloumn2 of the
Annexure;
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(ii) such goods shall be manufactured by using fly
ash purchased or received from the thermal power
stations situated on Uttar Pradesh;
(iii) the dealer claiming rebate under this notification
shall keep records in which following informations will
be shown:
(a) date;
(b) name of thermal power stations
from which flyash is purchased
or received;
(c) weight of flyash;
(d) name of manufactured goods;
(e) weight of manufactured goods;
(f) weight of flyash used in
manufacturing of such goods;
(g) weight of other goods used in
manufacture of such goods;
(iv) the total weight of manufactured goods and
percentage of flyash used, should be mentioned on
goods of packing of such goods as far as possible.
ANNEXURE
Serial
Number
Name of District Period for
which the
rebate will be
allowed
1 2 3
1 Banda, Hamirpur, Jalaun, Mahoba,
Jhansi, Lalitpur and Shahuji Nagar.
Twelve Years
2 Almora, Chamoli, Bageshwar,
Dehradun, Fatehpur, Jaunpur,
Kanpur (Dehat), Nainital, Pauri
Garhwal, Pithoragarh, Sultanpur,
Champawat, Tehri Garhwal, Udham
Singh Nagar, Uttar Kashi and Growth
Centre.
Twelve years
3. (i) The District of Azamgarh,
AmbedkarNagar, Behraich, Ballia,
Ten Years
5
Barabanki, Basti, Badaun,
Bulandshahr, Deoria, Etah, Etawah,
Faizabad, Farrukhabad, Ghazipur,
Gonda, Hardoi, Mainpuri, Mathura,
Mau, Moradabad, Padrauna, Pillibhit,
Pratapgarh, Raibareilli, Rampur,
Shahjahanpur, Sidharath Nagar,
Sitapur, Unnao, Kaushambhi,
JyotibaPhule Nagar, Mahamaya
Nagar and Shravasti.
(ii) The area of Allahabad District in
South of the river Jamuna and
confluent Ganga (Excluding the area
included under Municipal
Corporation, Allahabad).
Ten Years
(iii) The Taj Trapezium Area Ten Years
(iv) Greater Noida Industrial
Development Area
Ten Years
The Districts of Agra (excluding Taj
Trapezium area), Aligarh (excluding
Taj Trapezium area), Allahabad
(excluding the area in south of rivers
Jamuna and confluent Ganga but
including the area included under
Municipal Corporation Allahabad),
Bareilly, Bhadohi, Bijnor, Firozabad
(excluding Taj Trapezium area),
Ghaziabad (excluding Greater Noida
Industrial Development Area),
Gorakhpur, Haridwar, Kanpur
(Nagar), Lakhimpur Kheri, Lucknow,
Maharajganj, Meerut, Muzaffarnagar,
Saharanpur, Varanasi, Gautam Budh
Nagar, Chandauli, Mirzapur and
Sonbhadra
Explanation: The verification of percentage of flyash used
by flyash based industries shall be made of the basis of
Government orders issued in this behalf from time to time.”
6
3. This notification came to be issued with intent to promote and
encourage the industrial activities in the identified backward and
underdeveloped areas. This notification, however, was assailed in
two writ petitions filed before the High Court of Judicature at
Allahabad (for short, ‘the High Court’). The challenge was
essentially on the ground that the conditions specified in the
notification resulted in causing discriminatory treatment to the
producers and suppliers of the sale product imported from
neighbouring States as opposed to the goods manufactured and
produced in the State of Uttar Pradesh. Such dispensation
contravened the constitutional provisions of Articles 301 and 304(a)
th
of the Constitution of India. The High Court vide order dated 29
January, 2004 upheld the said challenge. The State of Uttar
Pradesh carried the matter in appeal against the said decision of
the High Court, which eventually culminated with the judgment of
this Court, affirming the challenge, in
State of Uttar Pradesh &
1
Ors. vs. Jaiprakash Associates Limited . This Court held that
rebate of tax granted by the State Government only to the cement
1 (2014) 4 SCC 720
7
manufacturing units using fly ash as raw material in the units
established in the districts of the State of Uttar Pradesh, is violative
of the provisions contained in Articles 301 and 304(a) of the
Constitution of India. The Court further declared that notification,
therefore, would also apply to the cement manufacturing units of
the neighbouring States who were using fly ash as raw material.
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4. After the decision of the High Court dated 29 January, 2004,
the appropriate authority was advised to rescind the Notification
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dated 27 February, 1998. The Principal Secretary of the Tax and
Registration Department processed the proposal for rescinding the
said notification and submitted for comments of Council of
Ministers which read thus:
“CONFIDENTIAL
COMMENTS FOR THE HONORABLE COUNCIL OF
MINISTERS.
SUB: Repealing the exemption (rebate) available
to units based on fly ash
Industries established in certain districts have been
granted exemption on tax levied under the Act for
eight, ten, twelve years vide Govt. Notification
No.vya.ka./592/gyarah9(226)/94, dated 27 February
1997, under Section 5 of the Trade Tax Act on the
following grounds:
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(a) Where the content of fly ash is 10%
to 30% of the total weight of goods – 25%
rebate on tax.
(b) Where the content of fly ash is more
than 30% of the total weight of goods
50% rebate on the tax.
2. Accordingly under Section 8 (5) of the Central Sales
Tax Act, by the Govt. Notification No.vya.ka/2
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593/gyaraha9 (226)94, dated 27 February 1998,
similar rebate has been allowed. A condition was
prescribed in the above notifications that such goods
shall be manufactured within the units established in
the area mentioned in column No.2 of the annexure
and such goods shall be manufactured from Fly Ash
purchased from or received from the thermal power
stations situated in Uttar Pradesh. Above notifications
were challenged before the Hon’ble High Court by the
writ petition.
3. Commissioner, Trade Tax has informed that in the
writ petitions No.957/99M/sBela Cement Ltd. Vs.
State and writ petition No.958/99 M/s Jai Prakash
Industries Vs State, Bench of the Hon’ble High Court
has by the order dated 29.1.2004 declared the above
conditions mentioned in the notification as
unconstitutional. It has also been mentioned that
effect of the above judgment shall be that henceforth
facility of rebate will not only be available to the above
types of industrial units situated in Uttar Pradesh
only, but above rebate shall also be available to the
unit situated outside the Uttar Pradesh. It is also
apprised that in regard to above, Addl. Advocate
General has given the legal opinion that
considering the revenue loss being caused in
future above notifications can be repealed. In case
above notifications have to be repealed from
retrospective effect then the same can be done by
way of an ordinance. In accordance with the legal
opinion tendered by the Hon’ble Add. Advocate
General, a recommendation has made to proceed
further expeditiously .
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4. It appears that the main objective of providing the
rebate vide the above notifications was that the
Industrial units of the Uttar Pradesh should utilize
more and more fly ash available for disposal in the
state, in view of the above rebates. In the light of
above judgment of the Hon’ble High Court, now above
rebate shall also be available to the unit situated
outside the state. Therefore it deems to be fit that
above notifications should be repealed. In this
regard the proposal of Commissioner Trade Tax
seems to be proper.
5. Therefore it is proposed that notifications
issued under section 5 of the Trade Tax Act and
Section 8 (5) of Central Sales Tax Act, related to
rebate applicable to industries based on the fly ash
should be repealed.
6. Finance department has expressed the consent
to the above proposal.
7. Law department has expressed the view that it
had been advised by the Add. Advocate General
that to prevent the revenue loss notification dated
22.7.1998 can be repealed. In view of the above
the proceedings for repealing the impugned
notifications is legally possible.
8. Honorable Minister has examined these comments.
9. Order of the Hon’ble Cabinet is prayed for on the
Para 5 above.
Sd/
(Rita Sinha)
Principal Secretary
Tax & Registration Department
File No.9 (63)/2001
Lucknow dated 19 August, 2004”
(emphasis supplied)
5. The appropriate authority of the State eventually took decision
on the said proposal, as a result of which a notification dated
10
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14 October, 2004 came to be issued rescinding the earlier
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notification dated 27 February, 1998. The said notification reads
thus :
“ NOTIFICATION
No.KA.NI.22996/XI9(63)/2001Act, 7456 Order –
(38) 2004
Dated Lucknow : : October 14, 2004
WHEREAS, the State Government is satisfied
that it is expedient so to do in public interest.
Now, therefore, in exercise of the powers sub
section (5) of Section 8 of the Central Sales Tax Act,
1956 (Act No.74 of 1956) read with Section 21 of the
General Clauses Act, 1897 (Act No.10 of 1897) the
Governor is pleased to rescind, with effect from
October 14, 2004 , the government notification
No.T.I.F – 2593/X9(226)/94Act7456Order98,
dated February 27, 1998.”
(emphasis supplied)
6. This notification is the subject matter of challenge in the
present proceedings.
7. The respondents in the respective appeals preferred separate
writ petitions asserting that because of the representation made to
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the stake holders vide notification dated 27 February, 1998, they
had commenced production of the specified goods and complied
with the requisite conditions provided under the said notification
entitling them to avail rebate of the Uttar Pradesh Tax facility. They
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had commenced commercial production before coming into effect of
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the impugned notification on 14 October, 2004. However, due to
coming into effect of stated notification they have been denied of the
rebate which they could have earned for ten years.
In the case of respondent in Civil Appeal No. 1579/2019
8.
M/s. Birla Corporation Limited (for short, ‘the BCL’), the factory was
set up by the said respondent at Raibareli and it had commenced
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commercial production from 14 December, 1998. As the said
respondent had complied with all the conditions specified in the
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notification dated 27 February, 1998, it availed the rebate facility
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from 14 December, 1998 until 13 October, 2004. It could have
continued to avail of that facility for a period of ten years, i.e., upto
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13 December, 2008, but that arrangement has been disrupted
because of the issuance of the impugned notification dated
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14 October, 2004. In other words, denial of rebate to respondent
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BCL is for the period from 14 October, 2004 to 13 December,
2008.
9. In the case of respondent in Civil Appeal No. 1580/2019
M/s. Jai Prakash Associates Limited (for short, ‘the JPAL’), it was
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operating its factory outside the State and because of the condition
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specified in the notification dated 27 February, 1998, had
challenged the said notification which, as aforesaid, was upheld by
the High Court and later by this Court. In terms of the said
decision, this respondent could have continued with its business
and also avail of the rebate but for the impugned notification issued
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on 14 October, 2004. However, despite the said
respondent (JPAL) having succeeded before the High Court in Writ
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Petition No.958 (Tax) of 1999 vide judgment dated 29 January,
2004, out of abundant precaution, it decided to set up a factory of
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its own in the area specified in the notification dated 27 February,
1998, to avoid any further controversy or dispute regarding tax
rebate facility. In furtherance of that decision, after seeking
necessary approvals, the said respondent (JPAL) commenced
commercial production in the factory set up in the notified area in
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the State of Uttar Pradesh w.e.f 18 September, 2004 and in terms
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of the notification dated 27 February, 1998, in vogue,
became entitled to avail rebate facility for a period of ten years, i.e.,
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up to 17 September, 2014. However, because of the intervening
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notification dated 14 October, 2004, the said respondent (JPAL)
has been denied of that facility even though it had invested almost
over Rs. 100 crores to set up a new factory within the notified area
in the State of Uttar Pradesh.
In this background, both the respondents filed separate writ
10.
petitions before the High Court asserting that the State could not
have resiled from the promise or representation it had made in
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terms of notification dated 27 February, 1998, and the impugned
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notification dated 14 October, 2004, therefore, suffered from the
vice of being violative of promissory estoppel. It was asserted that
the State, in exercise of its executive power, cannot resile from the
promise it had made by inviting setting up of industry within the
designated areas in the State of Uttar Pradesh and in the process,
withdraw the rebate facility with retrospective effect. That could be
done only by the legislature by enacting a law in that behalf or by
issuing ordinance as was suggested in the note submitted to the
Council of Ministers referred to above. It was also asserted that, in
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fact, the notification, as issued on 14 October, 2004, specified that
the same would come into effect from the date it is issued. There is
14
no indication whatsoever that the intention behind issuing the said
notification was to withdraw the facility of stake holders who had
already set up their industrial units and commenced commercial
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production prior to 14 October, 2004. The thrust of the challenge
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was that the decision to rescind the notification dated 27
February, 1998 was to discontinue the rebate to industry that
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would be set up on and from 14 October, 2004 and to other
industrial units in the neighbouring States on account of the
decision of the High Court. However, that decision cannot be
implemented or enforced against the industries which had already
commenced commercial production within the designated areas in
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the State of Uttar Pradesh after 27 February, 1998 but
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before 14 October, 2004. Taking any other view would result in
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giving retrospective or retroactive effect to the notification dated 14
October, 2004. That is impermissible in law.
11. The writ petitioners had also contended that in any case, the
State Government had failed to make out a case of inevitable
supervening circumstances warranting cancellation and withdrawal
of the rebate facility with retrospective effect. The fact that the High
15
Court decided the issue against the State and extended the benefit
to other industrial units in the neighbouring States, by itself cannot
be the basis much less a supervening circumstance to justify the
act of resiling from the commitment flowing from the notification
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dated 27 February, 1998.
12. The appellantState had resisted the writ petitions by filing
affidavit before the High Court. The stand taken by the State before
the High Court essentially was that the State had power to rescind
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its notification dated 27 February, 1998 and withdraw rebate
facility to all industrial units because of the supervening
circumstances. The emphasis to invoke that power was essentially
because of the judgment of the Allahabad High Court dated
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29 January, 2004 and the inability of the State to verify the claims
of the industrial units in the neighbouring States which was beyond
the territorial jurisdiction of the State authorities.
The High Court vide impugned judgment, in the first place
13.
held that the State had given assurance about the rebate on the
specified goods produced in the designated areas within the State
on complying with other conditions specified in notification dated
16
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27 February, 1998. It then proceeded to hold that the State
Government in the Indian context and the Indian jurisprudence was
amenable to the doctrine of promissory estoppel like any other
private party or individual. On that finding, the High Court
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concluded that the notification issued on 14 October, 2004 cannot
stand the test of judicial scrutiny qua the claim of the industrial
units which were already established within the designated area in
the State and had commenced commercial production of the stated
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goods before 14 October, 2004. It also rejected the stand
taken by the State Government that it was justified in doing so
because of supervening public interest and resultantly allowed the
writ petitions preferred by the concerned respondents herein. The
conclusion recorded by the High Court reads thus:
“ SUMMARY
121. Supervening public interest may not be
established merely by pleading in the counter affidavit.
It shall not be sufficient to meet out the requirement of
law. The supervening public interest should be
adjudged on the basis of material placed by the State
Government during the course of judicial review.
Nothing has been brought on record to establish as to
what prompted the government to revoke earlier
notification more so when the situation has not been
changed and flyash remain an ecological hazard
release by thermal power stations.
17
122. Since, before issuance of the impugned
notification the petitioner had started production
establishing the factory in Tanda, the principle of
promissory estopple attracted in view of catena of
judgement of Hon’ble Supreme Court particularly
Kalyanpur Cement Ltd (supra) as well as world wide
settled proposition of law, it shall be fitness of thing
and to maintain the people’s confidence in the
administration, ordinarily government should be abide
by its assurance or promise and person should not be
deprived of the benefit available from such assurance,
in case it acted on. Though the government has got
right to change its policy but that too is subject to
judicial review and the courts have got ample power to
ensure that because of change of policy fundamental
or statutory rights of the citizen is not infringed.
Equitable relief under the principle of promissory
estopple may be given by courts for the ends of justice.
123. The impugned notification should be given
prospective effect with regard to tax rebate. Thus,
industries which were established relying upon the
assurance given in the notification dated 27.2.1998
and started production are entitled for tax rebate for
the period which they were entitled at the time of
production or before the issuance of impugned
notification.
124. In view of above, writ petition deserves to be
allowed partly and petitioner seems to be entitled for
benefit of tax exemption in view of original notification
dated 27.2.1998. However, keeping in view the law on
the subject that government has got right to change
the policy on one hand and on the other hand,
petitioner’s right may be protected by applying the
impugned notification prospectively, the right available
under the principle of promissory estoppel may be
protected by applying the impugned notification
prospectively. The prayer for quashing the impugned
notification is refused and the relief is moulded
accordingly.
O R D E R
125. The writ petition is allowed in part to the extent
petitioner’s entitlement for tax exemption for the
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period available under the original notification dated
27.2.1998. Accordingly, a writ in the nature of
mandamus is issued directing the opposite parties to
provide tax exemption to the petitioner industry from
the date of production for the period of entitlement
under original notification dated 27.2.1998.
Writ petition is allowed in part. Cost easy.”
14. The State of Uttar Pradesh has assailed the decision of the
High Court. The argument canvassed on behalf of the State
concedes the legal position that even if the State Government is
bestowed with the executive power to withdraw the rebate facility, it
is obliged to justify before the court of law that the circumstances
were so overwhelming that it will be inequitable to hold the
Government bound by the promise. In other words, the intent
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behind the impugned notification dated 14 October, 2004 was
replete with supervening public interest. To buttress that, the State
has relied upon following reasons, stated to be supervening public
interest:
“i). The judgment dated 29.01.2004 of Allahabad High
Court in the earlier round of litigation by the same
petitioners and others had quashed condition No.1 of
notification dated 27.02.1998, by which Units situated
outside the State of U.P. were also made entitled to the
tax rebate. This judgment was subsequently affirmed
by this Hon’ble Court vide its judgment dated
12.04.2004 reported in (2014) 4 SCC 720 titled as
19
State of U.P. & Ors. Vs Jai Prakash Associated Ltd.
etc. etc.
ii). The effect of the judgment nullified the public
interest in granting the tax rebate.
iii). State had no territorial jurisdiction to ascertain fly
ash consumption and source of Units operating
outside the State of U.P.
iv). Utilization of fly ash was promoted in terms of
Government of India Notifications dated 14.09.1999 &
27.08.2003, as also directions given by Hon’ble Delhi
High Court in a PIL from 2003 to 2005. State was
taking all steps for disposal of fly ash by promoting its
use.
v). Future revenue loss.”
15. It is then urged that the High Court has not carefully analysed
each of these reasons, much less the impact of all the reasons
taken together justifying the exercise of power to rescind the
notification providing for rebate facility. It is also contended that
the decisions pressed into service by the respondents would be
applicable to ordinary situation where the principle of promissory
estoppel has been invoked by the State Government but the same
will have no application to the notification under consideration
which was the outcome of supervening public interest. In other
words, general principle of promissory estoppel and vested/accrued
rights have no application to a case of supervening public interest.
20
16. Lastly, it is urged that even if the writ petitionersrespondents
herein were to succeed, the entitlement of rebate would depend on
the fact whether the respondents have themselves paid the amount
claimed and have not passed on the burden to their consumers in
full or in part, as the case may be. The claim for refund as a
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consequence of applicability of the notification dated 27 February,
1998 for the specified period would depend on establishing the
foundational fact that the respondents had not passed on the
commensurate tax burden to their consumers. To buttress the
above submissions, reliance has been placed on the decisions of
this Court in State of Jammu & Kashmir vs. Trikuta Roller
2
; vs.
Flour Mills Pvt. Ltd. & Anr. Sales Tax Officer & Anr.
3
Shree Durga Oil Mills & Anr. ; and Shree Digvijay Cement Co.
4
Ltd. & Anr. vs. Union of India & Anr. .
Per contra, the respondents would adopt the reasons given by
17.
the High Court for sustaining their challenge to notification dated
th
14 October, 2004. It is urged that the notification dated
2
(2018) 11 SCC 260
3
(1998) 1 SCC 572
4 (2003) 2 SCC 614
21
th
14 October, 2004 cannot be construed as having retrospective or
retroactive effect and apply to the units which had already been set
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up and commenced commercial production prior to 14 October,
2004. Section 5 of the 1948 Act does not confer any power on the
executive to rescind the existing notification with retrospective or
retroactive effect. In absence of express power invested in that
behalf, it is not open to the executive to do so either in terms of
Section 5 of the 1948 Act or Section 21 of the General Clauses Act,
1897 (for short, “the 1897 Act”) or Section 21 of the Uttar Pradesh
General Clauses Act, 1904 (for short, “the 1904 Act”). Section 5(2)
of the 1948 Act reinforces the submission of the respondents that
the legislature has not invested any authority in the State or
executive to give retrospective or retroactive effect to its notification,
rescinding the existing notification unlike subsection (2), which
expressly provides for allowing rebate with effect from a date prior
to the notification. There is no express, much less, implicit or tacit
authority in the executive to issue a notification having
retrospective or retroactive effect. In support of this plea, reliance is
placed on the decisions of this Court in Kazi Lhendup Dorji vs.
22
5
Central Bureau of Investigation & Ors. and Industrial
Infrastructure Development Corporation (Gwalior) Madhya
Pradesh Limited vs. Commissioner of Income Tax, Gwalior,
6
.
Madhya Pradesh
18. It is urged that in the present case, an enforceable right had
accrued in favour of the respondent(s) under the notification dated
th
27 February, 1998 to avail the benefit of rebate for its full
th th
eligibility period up to 13 December, 2008 and 17 September,
2014 respectively. That right could not be interdicted and
th
disrupted by virtue of the impugned notification dated 14 October,
2004. It is not a case where the legislature has intervened to
interdict that right, but it is being done by a notification by an
authority who is not empowered to issue notification having
retrospective or retroactive effect. The respondents are relying on
the decisions of this Court which has taken the view that the
notifications cannot apply to units already set up prior to their
issuance. (See MRF Limited, Kottayam vs. Assistant
5
1994 Suppl. (2) SCC 116
6 (2018) 4 SCC 494
23
7
Commissioner (Assessment) Sales Tax & Others ; Southern
vs.
Petrochemical Industries Co. Ltd. Electricity Inspector &
8
ETIO & Others ; and Pournami Oil Mills & Ors. vs. State of
9
. In support of the argument that the subordinate
Kerala & Anr. )
th
legislation such as the notification dated 14 October, 2004 cannot
have retrospective or retroactive effect, reliance is placed on the
exposition in Director General of Foreign Trade & Anr. vs.
10
.
Kanak Exports & Anr.
19. While dealing with the argument of the State regarding
supervening or overwhelming public interest, it is urged that the
High Court was right in observing that the State Government had
failed to make out any case to justify the impugned notification
th
dated 14 October, 2004 on that principle. To buttress that
submission, our attention was invited to the relevant portion of the
pleadings before the High Court in the form of writ petition and
affidavits of both sides. Relying on the dictum in the cases of
M/s.
Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar
7 (2006) 8 SCC 702
8
(2007) 5 SCC 447
9
1986 Suppl. SCC 728
10 (2016) 2 SCC 226
24
11
Pradesh & Others and Manuelsons Hotels Pvt. Ltd. vs. State
12
, it is urged that there is heavy burden on the
of Kerala & Others
State to show that the public interest is so supervening and so
overwhelming that it would be inequitable to hold the Government
bound by the promise. It is urged that facade has been created by
the State Government for the first time before this Court about
supervening public interest. In any case, the reasons stated in
support thereof cannot stand the test of judicial scrutiny, inasmuch
th
as, the notification dated 27 February, 1998 and the stand taken
by the State Government on affidavits filed before the High Court in
support of the said notification in the first round of litigation,
clearly, were founded on the assertion that the object for grant of
rebate was to promote use of fly ash generated from thermal power
stations in Uttar Pradesh and utilization of the fly ash in
manufacture of goods to be produced by the industry set up in the
designated areas mentioned in the said notification. That was done
to address the environmental issues confronting the State in the
concerned areas and also to provide employment and job
11
(1979) 2 SCC 409
12 (2016) 6 SCC 766
25
opportunities to the locals due to setting up of industries in the
designated areas within the State of Uttar Pradesh. Admittedly, the
generation of fly ash in thermal power stations in Uttar Pradesh has
continued unabated causing serious health hazards in the
neighbourhood, turning fertile lands into barren lands. Notably,
th
the new industry set up in the designated areas after 27 February,
th
1998 and before 14 October, 2004 is using the fly ash generated in
thermal power stations in Uttar Pradesh. Thus, the newly
established industry would continue to achieve the object and
intent behind the said notification, which has not ceased to exist
and is still relevant. In such a situation, it is incomprehensible as
to how the principle of supervening public interest could be invoked
by the State much less of such magnitude that it would be
impossible for the State to hold or be bound by the promise made
th
by it in notification dated 27 February, 1998. The only reason
recorded in the proposal for issuing the impugned notification dated
th
14 October, 2004, as can be discerned from the note submitted by
the Principal Secretary of the concerned Department to the Council
of Ministers, mentions only about the fall out of the judgment of the
26
th
High Court dated 29 January, 2004. The apprehension of the
State that it would not be in a position to verify the factual basis to
deal with the claims of the industries operating from the
neighbouring States has already been considered and negated by
this Court in the previous round, which finding will continue to
operate against the State.
20. The respondents have distinguished the decisions pressed into
service by the appellant in the
Trikuta Roller Flour Mills P. Ltd.
(supra) and Shree Durga Oil Mills (supra) being decisions on the
facts of the concerned case. In the former case, the Court upheld
the stand of the State of supervening public interest because of the
unravelling of fraudulent transactions and bogus refund claims by
nonexistent traders who had neither filed the returns nor deposited
any taxes. In the latter case, the Court opined that the writ
petitioners had not given essential foundational facts nor had
challenged the vires of the relevant notification for grant of any
relief as claimed by them. The Court also noted that the concerned
notification did not grant exemption but it merely promised that
orders will be issued laying down the mode of administering the
27
concessions and incentives by the departments concerned and more
importantly that, before the unit of the writ petitioner started
th
production on 19 March, 1980, the earlier notification was already
th
abrogated on 20 May, 1977. It is submitted that in the facts of
that case, no relief could be granted to the writ petitioner nor it
could be allowed to challenge the authority of the executive for
having abrogated the earlier notification.
21. In addition, the respondents would rely on the exposition in
13
vs. to
State of Bihar & Others Kalyanpur Cement Limited
urge that the doctrine of promissory estoppel applies to notifications
th
such as the impugned notification dated 14 October, 2004. It is
th
further urged that the notification dated 14 October, 2004 violates
not only the principle of promissory estoppel but also is arbitrary
and hit by Article 14 of the Constitution of India. Reliance has been
placed on the decision in Lok Prahari Through Its General
14
Secretary vs. State of Uttar Pradesh & Others . Lastly, it is
contended that the argument of unjust enrichment has been raised
for the first time before this Court and ought not to be
13
(2010) 3 SCC 274
14 (2018) 6 SCC 1
28
countenanced. That would be a matter for consideration in the
refund proceedings which are still pending for decision before the
concerned authority. The respondents submit that the appeals be
dismissed being devoid of merits.
We have heard Ms. Aishwarya Bhati, learned senior counsel
22.
appearing for the State and Mr. S.K. Bagaria and Mr. S.B.
Upadhyay, learned senior counsel appearing for the respondents.
23. After cogitating over the rival submissions, it becomes evident
that the parties have proceeded on the premise that 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
29
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.
Before we proceed further, it would be apposite to extract
24.
Section 5 of the 1948 Act. The same reads thus :
“5. Rebate of tax on certain purchases or sale.—
(1) Where the State Government is satisfied that it is
expedient in the public interest so to do, it may by
notification, and subject to such conditions and
restrictions as may be specified therein, allow a rebate
up to the full amount of tax levied on any specified
point on—
(a) The sale or purchase of any goods, or
(b) The sale or purchase of such goods, by such
persons or class of persons as may be specified in the
said notification.
(2) The rebate under subsection (1) may be allowed
with effect from a date prior to the date of the
notification.”
25. On a bare reading of this provision, it is evident that there is
no express authority given to the Executive to issue notification for
“withdrawing or rescinding the rebate facility” from a date prior to
the date of notification. Section 5(2) merely constrict that power
only for “allowing” rebate with effect from a date prior to the date of
30
notification. That does not include, by necessary implication or
otherwise, power to “withdraw” or “rescind” the rebate from a date
prior to the date of the notification.
Section 21 of the 1897 Act also will be of no avail. The same
26.
reads thus :
“21. Power to issue, to include power to add to,
amend, vary or rescind notifications, orders, rules
—Where, by any Central Act or
or byelaws
Regulations a power to issue notifications, orders,
rules or byelaws is conferred, then that power
includes a power, exercisable in the like manner and
subject to the like sanction and conditions (if any), to
add to, amend, vary or rescind any notifications,
orders, rules or byelaws so issued.”
27. Section 21 of the 1904 Act, is pari materia to the above
provision and will be of no avail for withdrawing the rebate
from a date prior to the date of the notification. In the
present case, it is not necessary to dilate further on this
th
aspect as the plain language of the notification dated 14
October, 2004, reproduced above in paragraph 5, itself expressly
th th
rescinds notification dated 27 February, 1998 with effect from 14
October, 2004. There is no express or tacit intent manifested from
this notification, so as to construe it as bestowing power to
31
withdraw the rebate facility with effect from a date prior to the date
of notification as such. On this finding, nothing more is required to
be said as the concomitant of this finding would necessarily be that
th
all the industrial units set up after 27 February, 1998 and before
th
14 October, 2004 which had commenced commercial production,
must continue to qualify for rebate for specified term mentioned in
th
notification dated 27 February, 1998, subject to fulfilling all other
conditions specified therein.
28. In the case of BCL, the rebate ought to continue up to
th th
13 December, 2008 and in the case of JPAL, up to 17 September,
2014. Any other interpretation of the impugned notification dated
th
14 October, 2004, would entail in giving retrospective or
retroactive effect thereto. That is not predicated by Section 5 of the
1948 Act or the impugned notification itself. Having said this, it
would necessarily follow that the challenge to the notification on the
ground of being hit by doctrine of promissory estoppel need not
detain us any further. Similarly, the argument regarding the
circumstances in which the Government could stave off from the
32
th
dispensation under notification dated 27 February, 1998 has
become irrelevant.
29. Assuming that we need to examine the reasons offered by the
State Government to justify the impugned notification dated
th
14 October, 2004 of supervening public interest, it is noticed from
the pleadings exchanged by the parties before the High Court or for
that matter before this Court that the dominant reason weighed
with the State Government to rescind the earlier notification was
th
the effect of the decision of the High Court dated 29 January, 2004
and the logistical issues confronting the State in implementation of
that decision, including the financial implications for the future
State Revenue. For proper analysis of the plea so taken by the
th
State, we must go back to the intent behind notification dated 27
February, 1998. The dominant intent was to invite the investors to
set up industrial unit in the designated areas within the State of
Uttar Pradesh which were known to be underdeveloped or backward
areas and more importantly to address the environmental issue
because of the fly ash generated by the thermal power stations
situated in Uttar Pradesh and incidentally to generate job
33
opportunities and employment to the locals. It is one thing to argue
that because of the interpretation given to the notification dated
th
27 February, 1998 by the High Court and affirmed by this Court,
the industrial units situated in the neighbouring States may not be
th
able to fulfill the underlying intent behind the notification dated 27
February, 1998 in its letter and spirit. That is not the plea of the
State. Furthermore, it is undeniable that the thermal power stations
in the State of Uttar Pradesh are still operational and are generating
fly ash in the same manner and quantity as was happening in
February, 1998, if not more. It is also indisputable that the
industrial units set up in furtherance of the promise or
th
representation made in the notification dated 27 February, 1998
which had commenced commercial production in respect of
th
specified goods before 14 October, 2004, would continue to
achieve the same objective as is specified in the notification dated
th
27 February, 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
34
th
under the notification dated 27 February, 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
th
purpose underlying notification dated 27 February, 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
th
to be bound by the promise given in notification dated 27
February, 1998.
30. Indeed, the judgment rendered by the High Court and affirmed
th
by this Court in interpreting the notification dated 27 February,
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 interest in
reference to the activities of the industrial units who qualify the
th
conditions specified in notification dated 27 February, 1998 in all
other respects and had commenced commercial production of the
th
specified product before 14 October, 2004. Indubitably, an
enforceable right had accrued to and crystalised in favour of such
35
industrial units which could not be truncated or snapped unless
th
the dominant purpose for which the notification dated 27
February, 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. The question of future revenue loss would not
arise as the industrial units established in the neighbouring States
would not be eligible to avail of the rebate because of rescinding the
earlier notification. Suffice it to observe that the argument about
future revenue loss cannot be invoked against the industrial units
th
who had already established and commenced production after 27
th
February, 1998 and before 14 October, 2004. For, it can
be safely presumed that the policy makers were fully conscious
about the socalled loss of future revenue due to rebate to those
th
units when they had issued notification dated 27 February, 1998.
That ground cannot be set up against the industrial units who
th
qualify in all other respect under the notification dated 27
36
February, 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.
31. Having said this, it must necessarily follow that the impugned
th
notification dated 14 October, 2004 can have no application to the
settled enforceable right accrued to industrial units who fulfill all
th
other conditions specified in the notification dated 27 February,
1998, having commenced commercial production of the specified
th
goods before 14 October, 2004. In other words, we reject the
stand of the State Government about the supervening public
interest qua the respondents herein and similarly placed persons.
th
The notification dated 14 October, 2004 cannot be construed as
having retrospective or retroactive effect to whittle down the
accrued rights in favour of such industrial units.
37
32. In this view of the matter, it is unnecessary to dilate on the
precedents pressed into service to buttress the argument that
doctrine of promissory estoppel applies or not to the State
Government or about the power of the State Government to rescind
the earlier notification whereunder rebate under Section 5 of the
1948 Act had become due and payable to the eligible industrial
units. We also dispose of the grievance of the appellant that the
High Court has not elaborately dealt with the argument of
supervening public interest justifying the issuance of notification
th
dated 14 October, 2004. We say so because, we are convinced
with the argument of the respondents that no material fact has
been pleaded in the response filed before the High Court or in the
present proceedings by the State Government in that regard.
33. Nevertheless, we had permitted the State Government to
articulate the reasons which it did in the written submissions as
referred to in paragraph 14 above. We have analysed the said
reasons and are of the considered opinion that the same singularly
or taken together would be of no avail to the State Government, to
th
justify the application of the impugned notification dated 14
38
October, 2004, to industrial units already set up which had
commenced commercial production of the specified goods in the
th
designated areas before 14 October, 2004.
A priori, the respondents and similarly placed persons would
34.
be entitled to rebate for the relevant period prescribed in the
th
notification dated 27 February, 1998 which would continue to
remain in vogue until the expiry of the specified period, namely, ten
th
years. In the case of BCL up to 13 December, 2008 and in the case
th
of JPAL up to 17 September, 2014 respectively. The amount of
rebate, however, would depend on the verification of their refund
claim pending before the concerned authorities and would be
subject to just exceptions including the principle of unjust
enrichment. The respondents should be able to substantiate that
the amount claimed by them has not been passed on to their
consumers. Only then, they would be entitled for refund. The
competent authority may verify the claim for refund of each of the
respondent(s) in accordance with law and pass appropriate orders,
including about the interest for the relevant period.
39
35. We are in agreement with the respondents that the decisions
in (supra) and
Trikuta Roller Flour Mills P. Ltd. Shree Durga
Oil Mills (supra) turn on the facts of the concerned cases. The
dictum in those cases will have no application to the fact situation
of the present case in light of our above analysis. Similarly, the
observations made by this Court in the earlier round of proceedings
cannot come in the way of the respondents to pursue their claim for
refund of the rebate amount, for the relevant period. That be
decided in accordance with law.
36. In view of the above, these appeals must fail. Hence, the same
are dismissed with observations. There shall be no order as to
costs. All pending applications are also disposed of.
.………………………..,…..
J.
(A.M. Khanwilkar)
.………………………..,….. J.
(Dinesh Maheshwari)
New Delhi;
November 20, 2019.