Kerala High Court
Biji Vijayakumar vs The General Manager
Author: Antony Dominic
Bench: Antony Dominic
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
THURSDAY, THE 29TH DAY OF MARCH 2012/9TH CHAITHRA 1934
WP(C).No. 35361 of 2003 (I)
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PETITIONER(S):
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BIJI VIJAYAKUMAR, PROP.
M/S, POLY TECH PRODUCTS,
NEELI VEEDU,KURICHILA KODU
KODANAD P.O
BY ADVS. SMT.S.K.DEVI
SRI.M.RAJ MOHAN
SRI.SANTHOSH P.ABRAHAM
SRI.FRANKUR D.JAYAN
SMT.DEEPSUR D.JAYAN
SRI.K.P.PRADEEP (PAYYANNUR)
SRI.SHANMUGHAM D. JAYAN
SMT.P.K.MAYA DEVI
RESPONDENT(S):
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1. THE GENERAL MANAGER
DISTRICT INDUSTRIES CENTRE
ERNAKULAM
2. THE DIRECTOR OF INDUSTRIES & COMMERCE
VIKAS BHAVAN
TRIVANDRUM 695 033
3. THE KERALA FINANCIAL CORPORATION
H.O.VELLAYAMBALAM, TRIVANDRUM 695 033
REPRESENTED BY ITS MANAGING DIRECTOR
4. THE SALESTAX OFFICER
DEPT. OF COMMERCIAL TAXES
1ST CIRCLE, PERUMBAVOOR
MJL
WPC.NO:35361/2003
5. THE INTELLIGENCE OFFICER, SQUAD NO.II
DEPT.OF COMMERCIAL TAXES
IDUKKI, THODUPUZHA
R1 & R2 BY GOVERNMENT PLEADER SRI.NOBLE MATHEW
R3 BY ADV.SRI.K.JAJU BABU,SC,KERALA FINANCIAL CORPORATION
ADV. SRI.P.PARAMESWARAN NAIR, SC, KFC
ADV. SRI.M.M.SAYED MUHAMMED, SC, KFC
ADV. SRI.V.B.UNNIRAJ, SC, KFC
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
29-03-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
MJL
WPC.NO:35361/2003
APPENDIX
PETITIONER'S EXHIBITS:
EXT.P1 : TRUE COPY OF PROVISIONAL CERTIFICATE BEARING
NO.31/KND/8032 DATED 3-8-99
EXT.P2 : TRUE COOPY OF ORDER NO.B1-1122/99 DATED 25/10/99 ISSUED
BY SECRETARY KOOVAPADY GRAMAM PANCHAYAT
EXT.P3 : TRUE COPY OF APPLICATION NO.003469 DATED 10/12/99
EXT.P4 : TRUE COPY OF APPLICATION FOR TAX EXEMPTION DATED
12/2/01
EXT.P5 : TRUE COPY OF ORDER NO.A8/6013/2001 DATED 29-5-02 ISSUED
BY 1ST RESPONDENT
EXT.P6 : TRUE COPY OF LETTER NO.A8/6013/01 DATED 1/7/2003 ISSUED BY
1ST RESPONDENT
RESPONDENTS' EXHIBITS:
EXT.R3(a) : TRUE PHOTOSTAT COPY OF THE LETTER DATED 20/05/2009 SENT
BY THE 1ST RESPONDENT/PETITIONER TO HER COUNSEL
/TRUE COPY/
P A TO JUDGE
MJL
ANTONY DOMINIC, J.
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W.P.(C) NO.35361 OF 2003(I)
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Dated this the 29th ay of March, 2012
J U D G M E N T
Petitioner seeks to quash Exts.P5 and P6 orders. Ext.P5 is
an order passed by the first respondent rejecting Ext.P4, an
application made by the petitioner for exemption from sales tax,
on the strength of SRO.No.1729/1993. Aggrieved by Ext.P5
petitioner filed appeal which was rejected by the 2nd respondent
as per Ext.P6 order. It is these orders which are under
challenge in this writ petition.
2. Facts of the case are that, the Government of Kerala
issued SRO.No.1729/1993, providing that in the case of new
industrial units under the small scale industries sector, there
shall be sales tax exemption for a period of 7 years from the
date of commencement of the commercial production. This
notification was modified by SRO.No.1092/99 published as GO
(P) No.181/99 TD dated 31.12.1999. Relevant portion of this
notification reads as under.
WPC.No.35361/2003 2
"(i) new industrial units other than public sector
undertakings which have been set up or have
commenced commercial production before Ist
January, 2000;
(ii) new industrial units other than public sector
undertakings which have taken effective steps for
setting up new industrial unit prior to the Ist day of
January, 2000. An industrial unit shall be considered to
have taken such effective steps if it has, (a) obtained
provisional registration (applicable only in the case of
SSI units),(b) owned or acquired or has been allotted
land for establishing the industrial units and applied for
financial support from any regular financial
institution/Government before 1.1.2000 or ) in the
case of self financed units acquired for placed firm
orders for the purchase of the necessary plant and
machinery before 1.1.2000 provided that the unit
commences commercial production on or before the 31
st December, 2001."
3. Subsequently, SRO.No.295/2000 was issued by the
Government of Kerala dated 31.3.2000 modifying SRO
1729/1993 and 1092/99, which, to the extent relevant, reads as
under.
"(i) in sub-clause(ii) for the words, figures and brackets
"(b) owned or acquired" or has ben allotted land for
establishing the industrial unit and ) applied for
financial support from any regular financial
institution/government or acquired the necessary plant
and machinery provided that the unit "commences
commercial production on or before the 31st date of
December 2000",
WPC.No.35361/2003 3
4. In so far as this writ petition is concerned, according to
the petitioner in view of the promise that was held out by the
Government of Kerala as per SRO.No.1729/1993, by document
No.2642/99 of SRO Perumbavoor executed on Ist June, 1999
expending an amount of Rs. 2,65,000/-, she purchased a plot
of land for setting up a small scale industrial unit . Thereafter by
Ext.P1 dated 3.8.1999, petitioner obtained provisional
registration as a small scale industrial unit. She also submitted
an application to the Panchayat, seeking sanction to establish a
factory, which was accorded by the Panchayat as per Ext.P2
dated 25.10.1999. Petitioner submits that the land was
purchased and Ext.P1 registration and Ext.P2 permission were
obtained by her, acting upon the promise made by the
Government of Kerala vide SRO.No.1729/1993, offering
exemption from sales tax for a period of 7 years from the date
of commercial production.
5. According to the petitioner, with the funds available, it
was not possible for her to establish the unit and therefore she
submitted Ext.P3 loan application No.003469 dated 10.12.1999
to the Kerala Financial Corporation for Rs.22,87,000/-. It is
WPC.No.35361/2003 4
stated that after completing all procedural formalities, she was
granted a loan of Rs.18 lakhs. It is her case that utilising the
funds thus available, she purchased the required machineries
and raw materials during the period from 1.6.2000 to
31.12.2000 and started commercial production in her industrial
unit on 15.11.2000 and that first sale was made on 25.11.2000.
6. Subsequently, petitioner submitted Ext.P4 application
dated 12.2.2001 seeking exemption from sales tax for a total
sum of Rs.19,90,700/- asoffered by the Government of Kerala in
the SRO.No.1729/1993. This application was considered and
the first respondent passed Ext.P5 order rejecting Ext.P4
application and this order reads thus;
"M/s.Polytech Products, 13/332 B, Koovappady,
Kodanad has applied for Sales Tax Exemption
applicable for new industrial units. This is a
registered SSI unit bearing No.32757 dated
30.12.2000 engaged in production of Plastic
moulded goods. As per clarification in State Level
Committee on Sales Tax Exemption held on
4.2.2002 a unit shall be eligible for getting Sales
Tax Exemption only if the unit satisfies the
following conditions a, b or c.
a. should have provisional registration prior
to 1.1.2000.
b. should have acquired land and applied for
finance prior to 1.1.2000.
WPC.No.35361/2003 5
c. acquired necessary plant and machinery
prior to 1.1.2000.
In this case the unit has satisfied condition (a) and
part of condition(b). The date of filing loan
application at KFC is on 21.1.2000 ie after
1.1.2000. The case was placed in the District
Level Committee held on 13.5.2002 and the
committee resolved to reject the application.
O R D E R
In the circumstances stated above, the application of M/s. Polytech productions, Koovappady, Kodanad for Sales Tax Exemption is hereby rejected.
Sd/-
GENERAL MANAGER(I.C)"
7. Aggrieved by this order, she filed an appeal and the appeal was also rejected by Ext.P6 stating thus;
"Sub:- Industries - Sales Tax Exemption -
Appeal - rejected- reg.
Ref:- Proceedings No.FC 3/12823/02/K. Dis. dt. 2.6.2003 of Director of Industries and Commerce, Trivandrum."
"Your appeal dated 12.6.2002 is placed in the State Level Committee held on 15.3.2003 and is rejected. Rejection order of the Director is enclosed herewith."
8. It is aggrieved by these orders that the writ petition has been filed.
WPC.No.35361/2003 6
9. The contention raised by the counsel for the petitioner is that the petitioner had altered her position to her detriment acting upon the promise held out by the Government as per SRO.No.1729/1993 and that therefore in view of the principle of promissory estoppel, the respondents could not have deprived her benefits thereafter, relying on the provisions of SRO.No.1092/99 and 295/2000. In support of this counsel also placed reliance on the principles laid down in the Apex Court judgments in Pournami Oil Mills V. State of Kerala & Another 1987(65) STC(1), State of Punjab V. Nestle India Ltd. and another (2004(136) STC 35).
10. Learned Government Pleader resisted the plea of the petitioner relying on the provisions of SRO.No.1092/1999 and 295/2000 and contending that the petitioner did not satisfy the conditions prescribed for grant of exemption from sales tax. He also contended that Government, which frames a policy of exemption from tax due to it, was entitled to modify the same in public interest and that no beneficiary has any indefeasible right to claim the benefit irrespective of such policy decisions. In support of his contentions, Government Pleader relied on the WPC.No.35361/2003 7 decision of this court in Malabar Oxygen Co. V. Additional Sales Tax Officer (2004(3) KLT 987) and the Apex Court judgments in State of Rajasthan & Anor. V. Mahaveer Oil Industries & Anor (1999(115)STC 29) Bannari Amman Sugars Ltd., V. Commercial Tax Officer and Ors.(2005(139) STC STC 86) and State of Rajasthan & Anorther V. J.K. Udaipur Udyog Ltd. & another (2004(137) STC 438).
11. I have considered the submissions made by both sides.
12. From the pleadings it is therefore evident that the Government of Kerala had initially announced a scheme of exemption from sales tax in favour of small scale industrial units as per SRO.No.1729/1997 and subsequently, SRO.NO.1092/99 was issued which was published on 31.12.1999. This SRO provided that concession will be available to units which have taken effective steps to exstablish new industrial units prior to 1.1.2000. It was also clarified that an industrial unit shall be considered to have taken effective steps if it has obtained provisional registration applicable for SSI units, owned or acquired or has been allotted loan for establishing the industrial WPC.No.35361/2003 8 unit and applied for financial support from any regular financial institutions/Government before 1.1.2000. This condition contained in clause 2 of SRO.No.1092/99 was again modified by SRO.No.295/2000 published on 31.3.2000.
13. In this context it is necessary to notice that in the judgment in Malabar Oxygen Co. V. Additional Sales Tax Officer ( 2004(3) KLT 987), a Division Bench of this court had occasion to consider the provisions of SRO.No.1092/99 as modified by SRO.No. 295/2000. After analysing the SROs it was held by this court that all the conditions prescribed in the SRO should be cumulatively satisfied by an applicant to be eligible for the benefit of exemption as provided therein.
14. In so far as this case is concerned, pleadings are to the effect that the petitioner acquired the land for the industry and obtained provisional registration as a small scale industrial unit prior to 31.12.1999. It is also her case that she had applied for financial assistance to the Kerala Financial Corporation as per her application dated 10.12.1999. However, from the impugned orders and also the counter affidavit filed by the respondents, it is seen that the Kerala Financial Corporation WPC.No.35361/2003 9 had informed them that the application was made by the petitioner only on 21.1.2000. It was therefore that the respondents have adopted the stand in Exts.P5 and P6 that the petitioner did not satisfy the condition laid down in SRO.No.1092/99 as modified by SRO.No.295/00 which was to the effect that the petitioner should have applied for financial support from a regular financial institution before 1.1.2000 and that therefore is ineligible for the benefit of exemption. Although it was argued before this court that the petitioner did apply for financial assistance to the KFC by submitting Ext.P3 application dated 10.12.1999 and therefore had satisfied the requirements of the aforesaid SROs, in the light of the facts as disclosed in the counter affidavit filed by the State and also in view of the statements in Exts.P5 and P6 orders, which show that according to the KFC the application was made by the petitioner only on 21.1.2000, I am unable to accept the case of the petitioner and hold that the petitioner made the application before 31.12.1999.
15. The question that remains to be considered is whether the petitioner can justifiably invoke the principles of promissory WPC.No.35361/2003 10 estoppal against the respondents and contend that the modified clause contained in SRO NO.1092/99 as amended by SRO No.295/2000, could not have been made applicable in her case. It is the settled principle of law that when a promise is made by a State, and acting upon the said promise, if a citizen has altered his position to his detriment, the State is precluded from resiling from its promise to the prejudice of the citizen, except in cases where such change is justified on the ground of public interest. justfiied in . This is a principle of equity evolved by the courts over a period of time so that injustice is not caused to the citizen who rely upon the promise held out by the State.
16. However, in order to claim the benefit of promissory estoppal, the courts have always applied strict standards and it has been held that the foundation for claiming such a benefit should be strongly made out by the person concerned. Such principles have been laid down by the Apex Court in Bannari Amman Sugars Ltd. V. Commercial Tax Officer & Ors.(2005 (139) STC 86, where it was held thus;
"In order to invoke the doctrine of Promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party WPC.No.35361/2003 11 invoking the doctrine and bald expressions without any supporting material to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present in the mind of the court.
In Shrijee Sales Corporation V. Union of India (1997) 3 SCC 398, it was observed that once public interest is accepted as the superior equity which can override individual equity the principle would be applicable even in cases where a period has been indicated for operation of the promise. If there is a supervening public equity, the Government would be allowed to change its stand and has the power to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Moreover, the Government is competent to rescind from the promise even if there is no manifest public interest involved, provided no one is put in any adverse situation which cannot be rectified.
Similar view was expressed in Pawan Alloys and Casting P. Ltd., V. U.P. State Eelctricity Board AIR 1997 SC 3910 and in Sales Tax Officer V. Shree Durga Oil Mills(1998)1 SCC
573. It was further held that the Government could change its industrial policy if the situation so warranted and merely because the resolution was announced for a particular WPC.No.35361/2003 12 period, it did not mean that the Government could not amend and change the policy under any circumstances. If the party claiming application of the doctrine acted on the basis of a notification it should have known that such notification was liable to be amened or rescinded at any point of time, if the Government felt that it was necessary to do so in public interest."
17. Similarly in the judgment in State of Rajasthan & Anorther V. J.K. Udaipur Udyog Ltd. & another (2004(137) STC 438), the Apex Court has upheld the entitlement of the Government to change the policies declared by it in the following words;
"In this case the scheme being notified under the power in the State Government to grant exemptions both under section 15 of the RST and section 8(5) of the CST in the public interest, the State Government was competent to modify or revoke the grant for the same reason. Thus what is granted can be withdrawn unless the Government is precluded from doing so on the ground of promissory estoppel, which principle is itself subject to considerations of equity and public interest. (See Sales Tax Officer V. Shree Durga Oil Mills 1998(1) SCC
572). The vesting of the defeasible right is therefore, a contradiction in terms. There being no indefeasible right to the continued grant of an exemption (absent the exception of promissory estoppel), the question of the WPC.No.35361/2003 13 respondent-companies being an indefeasible right to any facet of such exemption such as the rate, period, etc, does not arise."
18. In the light of the above principles, I must hold that in order to clam the benefit of promissory estoppel, it should be established by the petitioner by specific pleadings and acceptable documents, that it was acting upon the promise held out by the State that she had set up the industrial unit in question. In the writ petition apart from making repeated statements that the petitioner had set up the units acting upon the promise held out by the State, there is no material what so ever to substantiate this contention. Therefore the essential and indispensable link between the promise allegedly held out by the State and the setting up of the industrial unit is absent in this case. In other words there is no material for this court to accept the case of the petitioner that the industrial unit in question was set up by her acting upon the promise held out by the State. Therefore, the necessary foundation for a case of promissory estoppel is absent in this case.
19. Further as held by the Apex Court, the scheme being one notified by the State Government, the State Government is WPC.No.35361/2003 14 equally competent to modify or revoke the scheme. If such revocation or modification is prospective, nobody can set up a case of principle of promissory estoppel. In other words even in a case where the foundation of principle of promissory estoppel has been made out, the State is prevented only from withdrawing the scheme with retrospective effect affecting existing beneficiaries of the scheme.
20. The question is whether revision of the scheme of exemption was prospective in nature. This question will have to be answered with reference to the provisions of SRO.No.1092/99. This SRO was published in GO(P)No.181/99 TD dated 30.12.1999. Clause (2) of this SRO provides that new industrial units which have taken effective steps for setting up their industrial unit prior to the first of January 2000, will be entitled to get the benefit of this SRO. In other words, by this order, Government discontinued the scheme announced by SRO.No.1729/99 prospectively with effect from 1.1.2000. Therefore, the implementation SRO.No.1092/99 was prospective in nature and the principle of promissory estoppel does not prevent the State from withdrawing an existing scheme WPC.No.35361/2003 15 with prospective effect. If that be so, on that ground also, the claim of the petitioner for the benefit of SRO.No.1729/99 has to fail. Therefore for these reasons I am unable to accept the case of the petitioner to invalidate Exts.P5 and P6.
Writ Petitions fails and is dismissed.
(ANTONY DOMINIC) JUDGE vi/