Andhra HC (Pre-Telangana)
Roxy Roller Flour Pvt. Ltd. And Anr. vs Government Of Andhra Pradesh And Ors. on 8 March, 1994
Equivalent citations: [1994]94STC464(AP)
JUDGMENT Y. Bhaskar Rao, J.
1. In this batch of writ petitions the constitutional validity of G.O. Ms. No. 561, Revenue (CT-II) Department, dated March 26, 1993, is the subject-matter of challenge on several grounds and hence this common judgment. Earlier to the issuance of the above impugned G.O., the Government of Andhra Pradesh through G.O. Ms. No. 377, Revenue, dated May 2, 1991, exempted wheat and wheat products for a period of five years, from payment of sales tax.
2. That exemption under that G.O. is now rescinded through the present impugned G.O. even before the expiry of five years period covered thereunder.
3. Earlier to the issuance of the rescinded G.O., the Andhra Pradesh Roller Flour Mills Association had by its best attempts and through incessant persuasions obtained the exemption from sales tax through the said G.O. In fact, there were proceedings, in Writ Petition No. 12391 of 1989 dated February 2, 1990 [Reported as Prabhudayal Ramanand v. State of A.P. .], that even preceded the issuance of the rescinded G.O.
4. The impugned G.O. dated March 26, 1993, is sought to be assailed by invoking, mainly, (1) the doctrine of promissory estoppel, (2) the doctrine of legitimate expectation, (3) principles of natural justice, (4) want of enabling provision in the statute to withdraw the exemption granted, (5) implicit waiver of right to rescind the beneficial exemption before the lapse of fixed period, etc.
5. Now, adverting to the contentions, we shall first take up the question whether the impugned G.O. is hit by the doctrine of promissory estoppel. It is submitted by the learned counsel, Sri E. Manohar, that pursuant to the exemption granted by the rescinded G.O., some of the petitioners have stated the industry in wheat and wheat products, while some others expanded the existing industry on the promise made by the Government that the exemption would be for a period of five years. Inasmuch as the exemption so granted is now withdrawn through the impugned G.O., it is contended by the learned counsel that the G.O. is hit by the doctrine of promissory estoppel.
6. To constitute promissory estoppel, it needs to be noticed, the following ingredients should be satisfied :
(1) One party has to make to the other party in clear and unequivocal terms/promise or representation;
(2) The promise should be intended to create a legal right or relationship or effect the legal relationship to arise in the future; and (3) The party making the promise must have the knowledge or intention that it would be acted upon by other party and in fact the party should have acted on the said promise.
7. This is admittedly not a case where a promise is made to a particular individual, more so to any one of the present petitioners. The petitioners have not established any of the above ingredients. Grant of exemption from sales tax cannot be said to be one in the nature of promise. Further, none of the petitioners could prove that any of the industries are newly established after issuance of the rescinded G.O. Even the petitioners in Writ Petition No. 10719 of 1993 came down and expanded the existing industry by further investment. Therefore, the submission that the petitioners acting upon the so-called promise started the industry afresh is not factually proved. Further more, as averred in the counter-affidavit, the very rescinded G.O. is the resultant of misrepresentation of facts by the Roller Flour Mills Association that in the neighbouring States there was no sales tax on wheat and wheat products. However, in truth, except in the States of Maharashtra and Gujarat, in other adjoining States, including Karnataka, there was levy of sales tax. In this background of fact position, particularly when the exemption was obtained on misrepresentation, the doctrine of promissory estoppel cannot be had recourse to. Further, granting or rescinding the exemption whether amounts to legislative or executive act is subject-matter of debate in Bombay Conductors and Electricals Ltd. v. Chandramouli, Under Secretary to the Government of India [1984] 55 STC 162. There, it is held by the Full Bench of the Delhi High Court that where a law is made by legislation, the same is of legislative character and a subordinate legislation made by virtue of the power conferred under the taxing statute is also legislative in nature, once they are required to be published in the Gazette. In the present case, the impugned G.O. was published in the Gazette as per the provisions of the A.P. General Sales Tax Act. Therefore, it is to be held that passing of the impugned G.O. is a legislative act. When once it is of legislative nature, the doctrine of promissory estoppel is not applicable.
8. In Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory Himachal Pradesh [1972] 29 STC 169 the Supreme Court held that the power to impose a tax is a legislative power, that that power can be exercised by the Legislature directly or it may delegate that power to some other authority, and that exercise of that power either by the Legislature or by its delegate is also of legislative character. Therefore, it could be held that power to grant exemption by the Government is a legislative nature; if power to grant exemption includes power to rescind the same, the power to rescind the exemption granted is also in the nature of legislative power.
9. In Excise Commissioner, U.P. v. Ram Kumar the Supreme Court, while dealing with the point, i.e., the validity of the appellants' demand from the respondents in respect of sales tax at the rate of ten paise per rupee on the retail sales of country spirit made by latter, held :
"The fact that sales of country liquor had been exempted from sales tax vide Notification No. ST 1149/X-802(33)-51 dated April 6, 1959, could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the revenues of the State which are required for execution of the plans designed to meet the ever increasing pressing needs of the developing society. It is now well-settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers."
10. In Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh the Supreme Court following the decision in Excise Commissioner case held :
"The doctrine of promissory estoppel could also not be pressed into service in the present case, as it is well-settled that there cannot be any estoppel against the Government in exercise of its sovereign legislative and executive functions."
11. In Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh , the Supreme Court elaborately discussed the principle of promissory estoppel and held :
"It may also be noted that the promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The Legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel."
12. In Jit Ram Shiv Kumar v. State of Haryana , the Supreme Court held that the plea of estoppel is not available against the levy of tax being the public purpose, i.e., for augmenting the revenues of the municipality.
13. In Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay , the Supreme Court held as under :
"There may be no promissory estoppel against exercise of legislative functions. Legislature can never be precluded from exercise of its legislative functions by resorting to doctrine of promissory estoppel."
14. In view of the above rulings and in the background of the fact position, we see no force in the contention advanced on the basis of doctrine of promissory estoppel while assailing the validity of the impugned G.O.
15. Now turning to the second aspect of the challenge on the ground of doctrine of legitimate expectation, it is to be noted that the earlier G.O. presently rescinded spelt out a period of five years being covered in the matter of exemption from payment of sales tax and that was withdrawn, as contended by Sri E. Manohar, without affording any opportunity or notice to the petitioners before issuance of the impugned G.O. and therefore it is invalid being hit by the above doctrine.
16. The learned Government Pleader, on the other hand, submitted that the rescinded G.O. was not issued in relation to any particular individual and therefore the question of issuance of any notice or affording opportunity, as contended, before its withdrawal does not arise.
17. It is to be noticed that the withdrawal of exemption, even during the run of five years period spelt out by the rescinded G.O., is one effected in the public interest, particularly to augment the financial resources of the State in the wake of the policy decision of the Government to impose prohibition of arrack in the State. When it is by virtue of the policy of the Government in order to achieve the aims and objects in the directive principles of the State as envisaged in the Constitution, the doctrine of legitimate expectation has no role to play for being taken recourse of. Further, the object of the augmentation of the financial resources is one in the public interest, as held in Excise Commissioner, U.P. v. Ram Kumar . Further, it is the stand of the Government that apart from the withdrawal of the exemption now in question, number of other concessions accorded earlier through different G.Os., namely, G.O. Ms. No. 116 dated February 8, 1989, G.O. Ms. No. 60 dated January 20, 1989, G.O. Ms. No. 329 dated April 9, 1986, G.O. Ms. No. 575 dated June 9, 1986, etc., were withdrawn in pursuance of the policy decision to augment financial resources. No doubt in the matter of readymade garments, there was reduction in the rate of tax granted through G.O. Ms. No. 599 dated June 30, 1993 and that was in order to promote export of readymade garments to earn foreign exchange.
18. The learned counsel Sri E. Manohar relied on a decision of the Supreme Court in Navjyoti Co-group Housing Society v. Union of India for the proposition of applicability of doctrine of legitimate expectation.
19. In that case, the practice that was being followed in the matter of allotment of land to the housing societies was on the basis of date of registration of the application thereof. However, by the impugned memo the date of approval of the final list of members of the society was sought to be made the basis. In those circumstances, it was held that the applicant-societies were entitled to legitimate expectation of following consistent past practice in the matter of allotment. It was further held :
"The existence of legitimate expectation may have a number of different consequences and one of such consequences is that the authority ought not to act to defeat the legitimate expectation without some overriding reason of public policy to justify its doing so."
20. In the present case, pursuant to the policy of the State to implement prohibition of arrack in the State and thereby to fill up the paucity of funds, the present impugned G.O. was issued. Thus, the above decision is of no help to the petitioners.
21. The learned counsel also relied on a decision in Union of India v. Hindustan Development Corporation [1993] 2 SCALE 506. In that case, the Supreme Court after referring to a number of earlier decisions, has elaborately discussed the doctrine of legitimate expectation and held :
"The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise......... A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above, person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same, several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest........
If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power of violation of principles of natural justice, the same can be questioned on the well-known grounds attracting article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles."
22. In the present case, rescinding of exemption was to augment financial resources to recoup the deficiency caused due to implementation of prohibition of arrack in the State and therefore the same is in public interest. In this view of the matter, the doctrine of legitimate expectation sought to be invoked is of no help as it does not get attracted.
23. In so far as the empowering provision to rescind the earlier exemption granted is concerned, it is to be noticed that section 9 of the General Sales Tax Act empowers the State Government to make exemption, or, reduction in the rate of tax by issue of a notification while section 15 of the General Clauses Act provides that the power to exempt, conferred by section 9, includes the power to rescind or revoke the same. Thus, a combined reading of section 9 of the General Sales Tax Act and section 15 of the General Clauses Act makes it clear that the power to grant exemption includes the power to rescind. It is relevant, at this stage, to have a look at the case law on this aspect.
24. In Subramania Iyer v. Travancore-Cochin State [1956] 7 STC 826 (TC) a notification dated February 5, 1951, was issued by the Government in exercise of its powers conferred under section 6(1) of the Travancore-Cochin General Sales Tax Act exempting tobacco from payment of tax and later a notification dated July 18, 1951, cancelling the earlier exemption was issued and that was the subject-matter in question. While deciding the said question, the High Court of Travancore-Cochin held :
"The second notification could not be said to have the effect of imposing any new tax on the petitioner but had merely removed the ban that had been placed on the levy of the tax which the statute had already imposed under section 3(1). The power of removing the ban was co-extensive with the power granted by section 6(1) to impose the ban and therefore the second notification was not ultra vires the powers of the Government."
25. In Parthasarathy Mudaliar v. State of Madras [1957] 8 STC 632 (Mad.) a notification under section 6(1) of the Madras General Sales Tax Act dated March 25, 1954, was issued exempting all sales of flowers, vegetables and fruits (other than potatoes, onions, nuts, coconuts, dehydrated vegetables, canned, preserved, dried or dehydrated fruits), from the tax payable and later by a notification dated December 16, 1954 the earlier notification was modified excluding the sales of sweet potatoes, yam and tapioca, garlic, ginger, green chillies and other similar varieties of vegetables from exemption and the latter notification was challenged. The Madras High Court held that the power of granting exemption conferred on the Government was not exhausted when the first notification was issued and that the Government had the power under section 6(1) to modify or amend that notification.
26. In State of Kerala v. Velayudhan [1963] 14 STC 382 (Ker) the State Government issued a notification exempting dealers other than the first and last dealers from the payment of tax in respect of the sale of copra on condition that they took out licence under rule 21 of the Travancore-Cochin General Sales Tax Rules on payment of fees and that exemption was withdrawn by the Government by issuing another notification and the same was challenged. The High Court of Kerala held that if the State Government has the power to grant an exemption by issuing a notification, it has also the power to withdraw the exemption by rescinding the notification by which it was granted.
27. In Yemmiganur Spinning Mills Limited v. State of Andhra Pradesh [1976] 37 STC 314 a Division Bench of this Court while considering the notification issued in G.O. Ms. No. 437 dated May 18, 1971, rescinding the exemption granted earlier in G.O. Ms. No. 167 dated February 19, 1971, giving it effect from April 19, 1971, held that notification in G.O. Ms. No. 437 was effective and enforceable only on and from July 1, 1971, the date of its publication in the Andhra Pradesh Gazette and not with effect from any earlier date. It was also held that the Government has power to rescind the exemption granted earlier but the same cannot be given retrospective effect.
28. In Bombay Conductors and Electricals Ltd. v. Chandramouli, Under Secretary to the Government of India [1984] 55 STC 162 also the Full Bench of the Delhi High Court held that the power to grant exemption includes the power to rescind the same.
29. In Commissioner, Sales Tax v. Agra Belting Works by notification under section 4 of the U.P. Sales Tax Act dated November 25, 1958, cotton fabrics of all kinds were exempted from payment of sales tax and by a subsequent notification dated December 1, 1973, beltings of all kinds which fell within cotton fabrics of all kinds were made taxable at the rate of 7 per cent and the said action of the Government was questioned. The Supreme Court held (majority view) that the action of the Government was proper even though there is no notification withdrawing earlier exemptions and the subsequent notification issued imposing higher rate of tax can be deemed to be notification withdrawing the earlier exemption and imposing higher tax for which the State has got power. Thus, it is held that though exemption is granted, the same can be withdrawn and higher rate of tax can be imposed. These decisions fortify our view that power to grant exemption includes the power to rescind the same.
30. Therefore, we hold that the power to grant exemption under section 9 of the General Sales Tax Act includes the power to rescind the same, and that the Government has got power in rescinding the exemption granted earlier and therefore the present contention advanced that the withdrawal of the earlier exemption through the present impugned G.O. is bad for the reason that there is no empowering provision in the statute for the State Government to rescind the earlier exemption, is not sustainable.
31. In so far as the contention that there is no change in the position of the industry in wheat products in the few years after granting of exemption through the rescinded G.O. is concerned, it is to be seen that even according to some of the petitioners themselves they have been making good profits subsequent to 1991 and that the State Government has taken it as a policy decision to impose prohibition in the State causing depletion to financial resources and these aspects, in our view, are sufficient to provide basis for the withdrawal of exemption.
32. In so far as the contention that the impugned G.O. was issued without issuing any notice to the petitioners or affording them with the opportunity of being heard is concerned, as submitted by the learned Government Pleader, in matters involving exercise of legislative functions the question of principles of natural justice of the kind complained of, was not to a particular individual or the petitioners as such and therefore the question of issuing any notice or affording any opportunity to the petitioners is not called for.
33. The learned counsel for the petitioners next attempted to assail the validity of the impugned G.O. by invoking articles 19(1)(g) and 300-A of the Constitution by contending that pursuant to the impugned G.O. rescinding the exemption from payment of sales tax, the industries run by the petitioners are hit bad. We should straightaway point out that except making this bald complaint, the petitioners have not proved that their industries are completely closed. As a matter of fact, it is averred in some of the writ petitions that the industries are making good profits. Further, as reflected by the counter filed, the sales tax on wheat and wheat products in the State of Andhra Pradesh is the lowest barring other two States, namely, Maharashtra and Gujarat, which are industrially well developed States. In this view of the matter, we find no force in this contention.
34. In so far as the contention that the notification covering the impugned G.O. is not authenticated by the Principal Secretary is concerned, we have to state that the learned Government Pleader has placed relevant file before us and on a verification we find the signature of the concerned Secretary therein and therefore, the contention that the G.O. is vitiated for want of authenticity has no factual basis.
35. Now adverting to the next contention that the very specification of the period, namely, five years in the rescinded G.O., amounts to waiver of the right of withdrawing the granted exemption before the lapse of the said period of five years is concerned, we have to observe that this contention has no foundation in the pleadings. None of the petitioners have pleaded about the waiver in their writ petitions. Inasmuch as this is a pure question of fact, in the absence of any pleading in this respect, resulting in a handicap for the other side to meet the same, it is not permissible to allow the petitioners to take this contention. Even otherwise also, the very reason behind the withdrawal of the exemption granted is for augmentation of the financial resources in the public interest. Moreover, as laid down by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh , the waiver is a question of fact and it must be properly pleaded and proved and no plea of waiver can be allowed to be raised unless it is pleaded and the factual foundation for it is laid in the proceedings.
36. For the foregoing reasons, we find no merit in this batch of writ petitions and they are accordingly dismissed. No costs.
37. Writ petitions dismissed.