Gujarat High Court
Gujarat Hotels Ltd. And Ors. vs State Of Gujarat And Ors. on 5 August, 1993
Equivalent citations: (1994)1GLR560
Author: C.K. Thakker
Bench: C.K. Thakker
JUDGMENT C.K. Thakker, J.
1. I have heard the parties regarding interim relief. Petitioner No. 1, Gujarat Hotels Ltd. (G.H.L. for short) incorporated under the provisions of the Indian Companies Act, 1956, having its registered office at Welcome Group, Vadodara. Petitioner No. 2 is a Director of petitioner No. 1-Company. Petitioner No. 3-Indian Tobacco Co. ("I.T.C." for short) is also a Company duly registered under the provisions of the Indian Companies Act, 1956, having its head office at Virginia House, 37, Chowringhes, Calcutta. Petitioner No. 4 is a shareholder of petitioner No. 3-Company.
2. It is the case of petitioners that the petitioner No. 1-G.H.L. was promoted in the year 1982 as joint sector Company by respondent No. 4 - M/s. Gujarat Industrial Investments Corporation Ltd. ("G.I.I.C." for short) and I.T.C. - petitioner No. 3. G.I.I C. is a Government of Gujarat undertaking established in the year 1968 with a view to promote industrial investment in the State of Gujarat. It is responsible for establishment of various industries in the State of Gujarat. G.I.I.C. facilitates industrial investment by rendering financial assistance to industries and sponsoring projects in joint and public sectors. G.I.I.C. is "State" within the meaning of Article 12 of the Constitution of India. Petitioner No. 1-Company was promoted by petitioner No. 3 and respondent No. 4 with the object of promoting hotel business which would subserve the Government of Gujarat's policy of creating necessary infra structure to augment industrialisation in the State and also to create employment and to boost tourism. The said object of promoting hotel business was initiated at the instance of the Government of Gujarat and also to implement the Government policy in that behalf. It was with the consent and approval of the Government of Gujarat that the formation of petitioner No. 1-Company was undertaken. On January 18, 1974 and subsequently on August 1, 1985 G.I.I.C. and I.T.C. entered into an agreement by which it was agreed between G.I.I.C. and I.T.C that G.I.I.C. shall take up 26.1% of the equity share capital while I.T.C. shall take up 24.9% of the equity share capital of the petitioner No. 1-Company. The balance of the equity shares were to be offered for: public subscription. This agreement was to remain in force for a period of 15 years. G.I.I.C. and I.T.C. gave undertakings to the financial institutions like I.F.C.I., I.D.B.I. and I.C.I.C I. that they would not transfer, assign or dispose of its shareholding in the Company until the loans taken by petitioner No. 1-Company under the loan agreements will be repaid. They have also undertaken that if there was any shortfall in the resources for completing the project or in the working capital, they would make the requisite arrangements for additional funds, so as to complete the project. Pursuant to the above object, some hotels were established in the State of Gujarat. Petitioner No. 1 took, on sub-lease a land and constructed a hotel in Vadodara by the name of "Welcome-group, Vadodara". For that purpose, loans to the tune of Rs. 303 lacs were also taken from the financial institutions and the State Bank of India by petitioner No. 1. Initially, hotel incurred heavy financial losses due to very high rate of luxury tax which was levied at 30%, low occupancy due to mushrooming of public guest houses, and very high electricity tariff rates. The luxury tax at the rate of 30% was the highest rate levied by any State in the country. By 31st March, 1991, the accumulated losses reached to Rs. 304 lacs and thus, about 80% of the equity had been eroded and petitioner No. 1 had become a "Sick Unit".
3. It is the case of the petitioners that G.H.L. could not make repayment of its dues to All India Financial Institutions and the Banks and was in continuous loss. The Government of Gujarat also realised that the company will be required to be wound up and it may lower down the image of the State Government. It may adversely affect huge investment already made by the State Government in the project. It may also prejudicially affect the employees employed by the company. It may Jeopardise the interest of about 12,500 share-holders who have invested their hard earned money in the company. The petitioners assert that the Government, therefore, decided to take some bold steps and positive actions with a view to prevent the closure of G.H.L. and to rehabilitate it. Due deliberations have been made at different levels by the Government of Gujarat and a meeting was convened on October 4, 1990 under the Chairmanship of the Chief Secretary, Government of Gujarat All the parties, namely All India Finance Institutions, Secretary of Tourism, the Managing Director of G.I.I.C. and the representatives of I.T.C. remained present at that meeting. Minutes were drawn up wherein it was stated that in view of the important role of the Hotel Industry in promotion of Tourism in the State, ail the parties agreed that petitioner No. 1 must be revived without any further delay and all the parties must contribute equitably for such revival. After considerable evaluation of various options, it was agreed that the following sacrifices, as reflected in the minutes, would be made by each party in net present value, term's of which read as under:
(a) Financial Institutions.... Rs. 83 lakhs. (b) Govt. of Gujarat/G.I.I.C.... Rs. 110 lakhs. (c) I.T.C.... Rs. 126 lakhs.
4. As far as the concession from the State Government is concerned, it is material for the purpose of controversy raised in the petition and, therefore, requires to be quoted:
Concessions From The State Government:
(a) Deferment, of luxury tax for, four years.
(b) Deferment of sales tax for four years.
(c) Deferment of purchase tax (State Sales Tax on input purchases) for four years.
(d) Deferment of electricity duty for four years.
(e) Total quantum of these deferred taxes will be repaid in four annual installments beginning from 1995-96.
5. It is the case of the petitioners that thus, the Government agreed for deferment of luxury tax for four years from 1991-92 to 1994-95. A Resolution Annexure "B", came to be issued by the State Government on March 22, 1991 pursuant to the minutes Annexure "A", IB the preamble, it was stated that G.I.I.C. and Welcome Group jointly formed a company called Gujarat Hotels Ltd. and set up a Five Star Hotel at Baroda. Looking to the huge losses and with a view to rehabilitate the company, the promoters had agreed to bring Rs. 124 lakhs. The Finance Institution (I.F.C.I.) had agreed to give reliefs in respect of past interest dues to the tune of Rs. 83 lakhs and the Government of Gujarat had sacrificed deferment of tax dues. The relevant part of the Resolution reads as under:
Resolution After careful consideration, Government is pleased to extend the following concessions as part of the rehabilitation plan to the Gujarat Hotels Ltd. for a period of 4 years from 1991-92 {i.e. from 1991-92 to 1994-95).
(1) Deferment of purchase tax by way of interest free loan through G.I.I.C. for an equivalent amount of Sales Tax paid by the Company for purchase of raw materials, etc. This loan will be disbuned by the G.I.I.C. and G.I.I.C. is authorised to make such disbursement on behalf of State Government. (2) Deferment of Electricity Duty.
(3) Deferment of Sales Tax.
(4) Deferment of Luxury Tax.
6. The above stand of the Government as reflected in Government Resolution, Annexure "B" was reiterated in Government Resolution Annexure "C" dated September 10, 1992. It is stated in Annexure "C" that after careful consideration, the Government had consented to the proposal of G.I.I.C. to permit I.T.C. to run G.H.L. (petitioner No. 1) on a license basis for 30 years and to extend the benefits of deferment of taxes specified in Government Resolution, Annexure "B" dated March 22, 1991 to I.T.C.
7. It is contended on behalf of the petitioners that in view of the Resolutions dated March 22, 1991 and September 10, 1992, deferment of payment of luxury tax was granted by the Government for a period of four years from 1991-92 to 1994-95. The State Government, thereafter, cannot demand luxury tax from the petitioners. According to the petitioners, to their utter shock and surprise, press report appeared on March 30, 1993 wherein it was reported that the Government of Gujarat was reconsidering to withdraw all the concessions given to the Five Star Hotels in the State including the hotel run by the petitioner No. 1-Company. The petitioner No. 1, therefore, immediately wrote a letter to Hon'ble the Chief Minister on April 2, 1993, Annexure "D", requesting him to continue the concessions granted in the rehabilitation package. Similar letters were addressed to the Ministers of State for Industry as well as Tourism on April 16, 1993. Inspite of the above decisions, resolutions and the letters, the State Government illegally, arbitrarily and unilaterally passed a Resolution on June 8, 1993 (Annexure "E") stating therein that the Government of Gujarat had decided to,, withdraw with immediate effect the concessions regarding deferment of luxury tax to the petitioner No. 1-Company. Important part thereof reads as under:
The State Government under Government Resolution dated the 22nd March, 1991 cited in the preamble have granted a package of concessions to Gujarat Hotels Ltd. jointly promoted by Welcome Group and Gujarat Industrial Investment Corporation Limited.
2. The matter regarding withdrawal of concessions of deferment of luxury tax was under consideration of Government for some time past. After careful consideration Government has decide to withdraw the concession regarding deferment of luxury tax out of the package of concessions granted to the Gujarat Hotels Ltd. and subsequently extended to I.T.C. Limited with immediate effect.
3. The amount collected by the Gujarat Hotels Limited and I.T.C. Ltd. on account of concession of deferment of luxury tax shall have to be paid to Government by Gujarat Hotels Ltd. and I.T.C. Ltd. within 30 days of the issue of this Government Resolution.
4. This issues with the concurrence of Finance Department dated 22-5-1993 of this Department's file of even number.
8. It is this Resolution which is challenged in the present petition since the representation against that Resolution made by the petitioner-Company on July 22, 1993 (Annexure 'F') has not been replied by the respondents. Pursuant to the impugned decision dated 8th June, 1993, notices came to be issued on June 23, 1993 and June 24, 1993 by the Collector, Baroda respondent No. 3 herein directing the petitioner No. 1-Company to pay the entire amount of luxury tax within the stipulated period failing which, the amount would be recovered as arrears of land revenue.
9. Mr. Desai, learned Counsel for the petitioners raised a number of contentions. He submitted that in accordance with the provisions of the Gujarat Tax on Luxury (Hotels and Lodging Houses) Act, 1977 (hereinafter referred to as 'the Act') the State Government has power to defer payment of luxury tax and the action which was taken earlier was in confirmity with law and could not have been set aside. He further submitted that before issuing resolution in June, 1993, and withdrawing the benefits granted in favour of the petitioner No. 1-Company, no show cause notice was issued, no explanation was sought, no hearing was afforded and hence, the impugned action is violative of the principles of natural justice and fair play. Mr. Desai also submitted that the impugned action is arbitrary, unfair and unreasonable inasmuch as taking into account all relevant facts and circumstances including the financial difficulties experienced by the petitioner No, 1-Company and the losses suffered by it, a decision was taken to grant certain benefits. Thereafter, in absence of change in circumstances, the Government cannot unilaterally withdraw the benefits granted earlier and cannot direct the petitioners to pay up the amount of luxury tax. Mr. Desai stated that pursuant to the decision taken by the High Power Committee, the petitioners acted to their detriment and as per the doctrine of promissory estoppel, the respondents cannot be allowed to go back from the promises held out by them to the petitioners. The said action is, therefore, contrary to law. the Counsel contended that had the notice been issued and an opportunity of hearing afforded to the petitioners, they could have satisfied the authorities that in the facts and circumstances of the case, the action taken in 1991 was legal, valid and in accordance with law and there was no necessity or reason to withdraw the concessions granted to the petitioners. Lastly, Mr. Desai submitted that even if it is assumed for the sake of argument that such an action could be taken by the State Government and the benefits of deferment of luxury tax could be revoked, no retrospective effect could be given and demand could not be made with effect from 1990. At the most, demand could be made from the date of passing of such resolution from June, 1993. Therefore, taking any view of the matter, the demand made by respondent No. 3 asking the petitioner-Company to pay luxury tax from 1990 cannot be said to be legal and the threatened action of recovery of luxury tax as an amount of land revenue is clearly illegal, unlawful and unreasonable.
10. Mr. Panchal, learned Asstt. G.P., on the other hand, supported the order passed by the authorities. He submitted that in accordance with the provisions of the Act, the State Government has power and authority to demand luxury tax and if the statutory power is exercised by the State Government, the petitioners cannot make grievance against such act and cannot approach this Court by invoking the provisions of Article 226 of the Constitution. He further submitted that a mistake was committed by the Government which is sought to be corrected. According to him, a mistake can always be corrected and it cannot be allowed to be perpetuated. He argued that even if it is assumed that the promise was given by the Chief Secretary on behalf of the State Government, such promise was contrary to law and prohibited by the statute. If the promise is contrary to law or against the statute, it cannot be enforced through judicial forum. If under the Act, luxury tax can be collected by the State Government, no officer on behalf of the State Government can give a promise or assurance to any hotellier that the State Government will not recover such tax. According to Mr. Panchal, such promise could not have been given by any officer on behalf of the State Government and even if such a promise is given, cannot be implemented and enforced. According to Mr. Panchal, no prom se was given to the petitioners by the respondents. At the most, it was merely a concession and a concession can always be withdrawn or revoked. A concession cannot create any legal justiciable and enforceable right in favour of a y person and if such a concession is withdrawn, a person in whose favour such concession is granted cannot approach a Court of law. According to the respondents, reliance placed by the petitioners on the doctrine of promissory estoppel is ill-founded and misconceived. Mr. Panchal submitted that in the facts and circumstances of the case, the petitioners cannot invoke extraordinary jurisdiction of this Court under Article 226 of the Constitution of India inasmuch as. admittedly, the petitioners have recovered such tax from their customers. The amount has been pocketed by the petitioners. Thus, the amount of tax which has been paid by the customers and collected by the petitioners for and on behalf of the State Government cannot be allowed to be retained by them. The doctrine of estoppel is based on equitable principles. A person cannot invoke this doctrine where there is no equity. Taking into account the consideration of equity and public policy, when the petitioners have already collected and pocketed the amount of luxury tax from their customers, there cannot be any objection by the petitioners if they are called upon to pay the said amount to the State Government to whom it belongs. Hence, if a direction is issued to the petitioners to pay the said amount to the State Government, no grievance can be made by the petitioners and no reliefs can be granted in petitioners' favour. Mr. Panchal also submitted that no retrospective effect is given as contended by Mr. Desai. The amount which has been collected by the petitioners is required to be paid and must be paid to the State Government. On all these grounds, the petition does not require any consideration and requires to be dismissed.
11. Having given anxious and thoughtful consideration to the facts and circumstances of the case, I am of the opinion that interim relief as prayed for by the petitioners cannot be granted. Looking to the provisions of the Act, it clearly appears that subject to the provisions of the Act, a person is liable to pay tax known as luxury tax in respect of any luxury provided to him in hotel at the rates prescribed. Sub-section (3) of Section 3 indicates that the tax payable under Section 3 of the Act shall be collected by the proprietor. It reads as under:
(3) The tax payable under this section shall be collected by the proprietor and be paid into a Government treasury within the time and in the manner provided in the Act.
(Emphasis supplied)
12. Section 4 of the Act prescribes mode of collection of tax whereas Section 5 provides for filing of returns. Section 6 lays down procedure for assessment and collection of tax. Section 7 empowers the Collector to impose penalty in certain cases while Section 7A imposes liability on proprietor to pay interest on amount of tax if it is not paid within the stipulated period. Section 8 is material and requires to be quoted in extenso:
8. (1)(a) The amount of tax-
(i) due where returns have been furnished without full payment therefor,
(ii) assessed for any period under Section 6 less any sum already paid by the proprietor in respect of such period;
(b) the amount of penalty, if any, levied under Section 7,
(c) the amount of interest, if any, payable under Section 7A shall be paid by the proprietor liable therefor into a Government treasury by such date as may be specified in the notice issued by the Collector for this purpose being a date not earlier than thirty days from the date of service of notice:
Provided that the Collector or the appellate authority in an appeal under Section 9 may in respect of any particular proprietor and for reasons to be recorded in writing, extend the date of payment, or allow him to pay the (tax, penalty or interest) (if any) by instalments.
(2) Any (tax, penalty or interest) which remains unpaid as per the date specified in the notice of payment or after the extended date of payment and any instalment not duly paid, shall be recoverable as an arrear of land revenue.
Sections 9 and 10 provide for filing of appeal and revision to the State Government against an order of assessment. Sections 16 and 17 enable the authorities to enforce attendance and examination of witnesses and to produce documents, records and registers or to furnish information. Section 19 bars jurisdiction of Civil Court in certain cases.
13. Mr. Desai submitted that in the instant case, the petitioners have not been completely exempted from payment of luxury tax. Similarly, no order of refund of luxury tax is passed in their favour. Taking into account the financial difficulties of petitioner No. 1-Company, a decision was taken by the State Government alongwith other financial institutions only to defer the payment of luxury tax with a view to revive the petitioner-Company. According to Mr. Desai, by no stretch of imagination, such action can be said to be unlawful or contrary to law.
14. Considerable reliance was placed by the learned Counsel for the petitioners on the doctrine of promissory estoppel. Relying upon various decisions of the Hon'ble Supreme Court as well as of this Court, Mr. Desai submitted that nobody is above the law. Everyone is subject to the law and the Government is not an exception. Mr. Desai submitted that in the facts and circumstances of the case, the High Power Committee came to be appointed to consider financial difficulties of the petitioner No. 1-Company. The committee considered all relevant circumstances. It was conscious of various statutes including the Gujarat Taxes on Luxuries (Hotels and Lodging Houses) Act, 1977. After considering the implications of that statute and the difficulties of the company, it was decided to grant certain concessions in favour of the petitioner-Company and one of such concessions was the deferment of payment of luxury tax recovered by the petitioner-Company. It was, therefore, submitted that the State Government was aware of the fact that the petitioner-Company recovered the taxes from its customers for and on behalf of the State Government. But since the petitioner-Company was financially hard-pressed, with a view to boost it up, some steps were required to be taken and one of such steps was to allow the petitioner-Company to retain the amount of luxury tax collected by it by deferring the payment thereof for some time. Thus, the Government had, with an open eye, permitted the petitioner-Company to recover luxury tax from the customers. This according to the learned Counsel for the petitioners was a promise held out by the Government to the petitioner-Company and the Government cannot, now back out of the said promise. Precisely in such circumstances, the doctrine of promissory estoppel would apply and would prevent the Government from backing out the promise held out earlier. Mr. Desai submitted that the contention of the learned Counsel for the respondents that no such promise could have been held out by the Government since it was contrary to law is not correct. He empathetically submitted mat a promise of deferment of levy of tax cannot be said to be contrary to law inasmuch as there is neither exemption from payment of luxury tax nor an agreement to refund tax. The concession was only for deferment of payment for a stipulated period and such deferment is always permissible in law.
15. In my considered opinion, doctrine of promissory estoppel cannot be invoked and pressed into service by the petitioners on the facts and in the circumstances of the case. It is no doubt true mat the principle is well established. It is elementary law in Republic governed by Rule of law. No one howsoever high or low is above the law. Everyone is subject to law and Government is not an exception. The Government stands on the said footing as a private individual and is equally bound so far as application of law is concerned. The Government is as much bound as a private individual to carry out the representations of facts and promises held out by it relying on which other persons, have altered their position to their prejudice. As observed by the Hon'ble Supreme Court in the cast of Century Spinning & Manufacturing Co. v. Ulhasnagar Municipality , "if our nascent democracy is to thrive different standards of the conduct for the people and public bodies cannot ordinarily be permitted. The public body is not exempt from liability to carry out its obligations arising out of the representations made by it relying upon which a citizen has altered his position to his prejudice." The above principle has been accepted and reiterated in a number of subsequent decisions in M.P. Sugar Mills v. State of Uttar Pradesh , Gujarat State Financial Corporation v. Lotus Hotels, , Union of India v. God Frey Philips India Ltd. , Express News Papers Pvt. Ltd. v. Union of India , and in other cases.
16. At the same time, however, it cannot be forgotten that there cannot be any estoppel against a statute. The doctrine cannot be allowed to operate so as to override clear words of an Act. Likewise, the doctrine, cannot be extended or applied, if there is fraud on a statute. Finally, it must always be remembered that the doctrine is equitable one and it must yield to equity and, hence, it can be invoked only if larger public interests demand. Any promise or agreement opposed to public policy or public good being inequitable and against the public interest cannot be enforced under the guise of estoppel. In the words of Bhagwati J. (as he then was) in M.P. Sugar Mills (supra), "The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavor of the Courts and the legislature must, therefore, be to close the gap between the law and morality and bring about as near approximation between the two as possible."
16.1. If the above well settled principles are to be kept in mind, I have no hesitation whatsoever in holding that the petitioners cannot claim interim relief against recovery of luxury tax. It cannot be gainsaid that under the provisions of the Act, the State Government has power, authority and jurisdiction to levy luxury tax. The petitioner-Company has collected such tax from its customers for and on behalf of the State Government. Under the Act, the petitioner-Company is bound to pay the said tax to the State Government. If for some time such amount of tax is not recovered by the State Government or deferment is allowed, in my opinion, at the most it can be said to be a concession given to the petitioner-Company. Such concession can always be withdrawn and withdrawal of such concession cannot confer justiciable right on the petitioner-Company Rajalakshmiah v. State of Mysore AIR 1967 SC 993. When the petitioner-Company has to recover luxury tax under the Act for and on behalf of the State Government and has in fact recovered it, it is obligatory on the part of the company to pay the amount of tax to the State Government. It, therefore, cannot be said that the action of the State Government in directing the petitioner-Company to pay such tax can be said to be ultra vires, arbitrary or unreasonable so as to restrain it from recovering such amount at interlocutory stage.
17. The matter can be looked at from different angle also. An interim relief can always be granted in the aid of and as ancillary to the main relief. But the power to grant interim relief is in the discretion of the Court. The said discretion, however, should be exercised judiciously, reasonably and on equitable considerations with due regard to public interests. In matters touching public revenue, the Court must be more careful and cautious. Before exercising "veto" power over public exchequer, it should be conscious of far-reaching consequences, administrative difficulties and unforeseen circumstances.
18. No doubt, the power of this Court under Article 226 of the Constitution is very wide. But it is required to be exercised with prudence, discretion and circumspection. Since the power is coupled with duty, it needs to be exercised bona fide, in larger public interest, with good amount of self-restraint and with a sense of responsibility and accountability.
19. In the instant case, the facts are glaring and undisputed. The petitioner-Company has received the amount of tax from its customers for and on behalf of the State Government and seeks to prevent the Government from realising the said amount which is otherwise payable to the State Government under the Act. In my opinion, therefore, this is not a fit case in which interim relief should be granted in favour of the petitioners. There will not be miscarriage of justice, if interim relief is refused. On the contrary granting of interim relief would amount to abuse of process of Court. Hence, interim relief is refused. Ad-interim relief granted earlier is vacated.
20. At this stage, learned Counsel for the petitioners submits that if initially when the notice was issued on July 15, 1993, ad-interim relief was granted. He submitted that the petitioners are desirous to approach higher forum. Hence, ad-interim relief granted earlier may be ordered to be continued for some time so as to enable them to get appropriate relief against this order. In my opinion, prayer is reasonable. On the facts and in the circumstances of the case, ad-interim relief granted earlier is ordered to continue till 20th January, 1994.