Himachal Pradesh High Court
M/S Winsome Textile Industries Ltd vs State Of Himachal Pradesh & Others on 8 April, 2015
Author: Sanjay Karol
Bench: Sanjay Karol, P.S. Rana
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
CWP No.314 of 2014-B
Judgment reserved on: 25.03.2015
.
Date of Decision : April _8__, 2015
M/s Winsome Textile Industries Ltd. ...Petitioner.
Versus
State of Himachal Pradesh & others. ...Respondents.
Coram:
The Hon'ble Mr. Justice Sanjay Karol, Judge.
The Hon'ble Mr. Justice P.S. Rana, Judge.
Whether approved for reporting? Yes. 1
For the Petitioners : Mr. R.L. Sood, Sr. Advocate with
M/s Arjun Lall and Sanjeev Kumar,
Advocates, for the petitioner.
For the Respondent : Mr. Ashok Chaudhary and Mr. V.S.
Chauhan, Additional Advocate
Generals, and Mr. J.S. Guleria,
Asstt. AG., for respondent No.1.
Mr. Satyen Vaidya, Advocate, for
respondents No. 2 and 3.
Sanjay Karol, J.
The points which arise for consideration in the present petition are: (i) (a) as to whether petitioner is entitled to the incentives of reduction in the rates of excess duty only in terms of vide notification dated Whether reporters of Local Papers may be allowed to see the judgment?
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 227.07.2012 (Annexure PB); (b) as to whether notifications dated 17.08.2012 and 04.03.2014 .
(Annexures PC and PC-1 respectively) are applicable only to large industrial units established prior to 01.04.2012; (ii) if not, then as to whether respondents, on facts and in law are estopped from charging the excisable duty in excess of notifications Annexures PC and PC-1; and (iii) as to whether petitioner is entitled to interest on the excess amounts so deposited under protest.
2. Answer to the same would lie in application of two fundamental principles of law: (a) doctrine of promissory estoppel and (b) interpretation of fiscal statute and subordinate legislation.
3. The Government of Himachal Pradesh, took a conscious decision of providing certain incentives to all new industrial units to be established in the State of Himachal Pradesh. As such, by virtue of and in exercise of its statutory powers under the Himachal Pradesh Electricity (Duty) Act, 2009 (hereinafter referred to as the Act), the Government of Himachal ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 3 Pradesh, issued notification dated 27.07.2012 (Annexure PB), which reads as under:-
.
"GOVERNMENT OF HIMACHAL PRADESH DEPARTMENT OF MPP AND POWER File No.MPP-F(10)-17/2012 Dated 27th July, 2012 NOTIFICATION In exercise of the powers conferred by Section 11(1) of the Himachal Pradesh Electricity (Duty) Act, 2009 the Governor, Himachal Pradesh is pleased to give an exemption of 5% on the electricity duty for a period of 5 years to all new Industrial Units coming up in the State of Himachal Pradesh with effect from 01-04-2012. With this exemption the rates of electricity duty chargeable from the new Industrial units set up with effect from 01-04-2012 for 5 years will be as under:-
Sr.No. Category Rates of Rates of Electricity Duty
Electricity chargeable from new
Duty for Industrial units setup
Industrial w.e.f. 01-04-2012
Consumers
1. Small Industrial 9% 4%
consumers.
2. Medium Industrial 15% 10%
consumers
3. Large Industrial 20% 15%
consumers (above
100 KW) connected
load)
By order
Sd/-
(Deepak Sanan)
Addl.Chief Secretary (MPP & Power) to the Government of Himachal Pradesh"
[emphasis supplied]
4. Subsequently Government issued another notification dated 17.08.2012 (Annexure PC) which reads as under:-
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 4"GOVERNMENT OF HIMACHAL PRADESH DEPARTMENT OF MPP AND POWER File No.MPP-F(10)-17/2012 Dated 17th August, 2012 .
NOTIFICATION In exercise of the powers conferred by Section 11 of the Himachal Pradesh Electricity (Duty) Act, 2009, the Governor, Himachal Pradesh in public interest, is pleased to reduce the rate of Electricity Duty in respect of Large Industrial Consumers (above 100KW connected load) as levied under Section 2(c) of the Himachal Pradesh Electricity (Duty) Amendment Act, 2010 from 20% to 17% with immediate effect.
By order r Sd/-
(Deepak Sanan) Addl.Chief Secretary (MPP & Power) to the Government of Himachal Pradesh"
[emphasis supplied]
5. Yet vide another notification dated 04.03.2014 (Annexure PC-1), reproduced hereinbelow, Government reduced the rate of electricity duty, chargeable w.e.f. 01.04.2014:-
"MP AND POWER DEPARTMENT NOTIFICATION Shimla-2, the 4th March, 2014 No. MPP-F(10)-17/2012.--In exercise of the powers conferred by Section 11(1) of the Himachal Pradesh Electricity (Duty) Act, 2009, as amended from time to time and in partial modification of earlier notifications issued in this regard, the Governor, Himachal Pradesh, is pleased to ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 5 order reduction in Electricity Duty in respect of industrial units in the State of Himachal Pradesh with effect from 1st April, 2014 in the following manner"-
.
Sr.No. Category Existing Rate of Revised Rate of Electricity Duty for Electricity Duty Industrial chargeable w.e.f. 1-
Consumers 4-2014 for
Industrial
Consumers except
Cement Industries.
1. Extra High Tension 17% 15%
(EHT) category
consumers (Large
Industrial
consumers) (above
33 KV connected
load).
2. Large Industrial 17% 13%
Consumers above
100 KW connect
load)
3. Medium Industrial 15% 13%
Consumers except
EHT
4. New Medium and 13% 5% for 5 years
Large Industrial
Unit consumers
except EHT
5. Existing Small 9% 7% for 5 years
Industry consumers
6. New Small Industry 9% 2% for 5 years
7. New Industry As above 2% for 5 years.
including EHT
category which
employ more than
300 Himachalis
By order
Sd/-
S.K.B.S., Negi,
Principal Secretary (Power)."
[emphasis supplied]
6. Duty on consumption of supply of energy, is chargeable under Section 3 of the Act. As per the ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 6 amended provisions of the Act (w.e.f. 06.09.2010), the prescribed rate of duty for large industrial consumer .
(above 100 KW connected load) is 20%. By virtue of Section 4, first charge on such electricity duty is that of the State Government. Failure to pay the same entails penal consequences, as provided under Sections 7 and
10. Also all dues are recoverable as arrears of land revenue under Section 8. State Government, by virtue of provisions of Section 11, by issuing notification in the Official Gazette, has power to exempt any consumer from the payment of whole or part of the electricity duty for such period and upon such terms as may be specified in the notification.
7. Section 11 reads as under:-
"11. Power to exempt from payment of electricity duty.- (1) The State Government may, in public interest, by notification in the Official Gazette, exempt any licensee, consumer or person from the payment of the whole or part of the electricity duty for such period and subject to such conditions as may be specified in such notification. (2) The State Government may, by notification, revise the rates of electricity duty ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 7 not exceeding 50% at any one time, of the rates specified under section 3."
[emphasis supplied] .
8. Petitioner is in the business of manufacturing of yarns etc. It is not in dispute that pursuant to the aforesaid notifications (Annexures PB and PC), petitioner herein established its large scale unit (Unit No.II) on 19.04.2013. That petitioner is a large industrial consumer, having more than 100 KW connectivity load, is also not in dispute.
9. Despite the aforesaid notifications, H.P. State Electricity Board (respondent No.2 herein) raised bills for the electricity, so consumed by the petitioner, also levying duty @ 15%. Undisputedly, petitioner has not only paid the electricity charges but also under protest, deposited the amount towards the duty.
Petitioner contends that excess amount of `39,00,000/-
(rupees thirty nine lacs - approximately) stands deposited towards the component of duty.
10. It is not in dispute that respondent No.2 has raised bills, interpreting the aforesaid notifications, in ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 8 the manner in which respondent No.1 wants it to be construed.
.
11. Respondent No.1 pleads that notifications dated 27.07.2012 and 17.08.2012 (Annexures PB & PC respectively) have "distinct and different intent and applicability, as is evident from bare reading of them".
Whereas, notification dated 27.07.2012 (Annexure PB) is applicable to "new industrial units coming up in the State w.e.f. 01.04.2012", notification dated 17.08.2012 (Annexure PC) "allows reduction in electricity duty to Large Industrial Consumer which were established prior to 01.04.2012." In effect, notifications (Annexures PC and PC-1), which according to the respondents are unambiguously clear, are applicable only to such of those large industrial units, which were established prior to 01.04.2012.
12. Acting upon notification dated 27.07.2012 (Annexure PB), after 01.04.2012, by making huge investments, petitioner has made operational a new industrial unit, in the State of Himachal Pradesh.
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 9Principles of Promissory Estoppel
13. The question as to what is promissory .
estoppel is no longer res integra. Since the year 1951, Courts have enunciated and reiterated the principles with regard to the same. Recently Hon'ble the Supreme Court of India in Pratima Chowdhury Versus Kalpana Mukheerjee and another, (2014) 4 SCC 196, speaking through Hon'ble Mr. Justice J.K. Khehar, J., has held that:-
r "35. ...... ...... ......
It needs to be understood, that the rule of estoppel is a doctrine based on fairness. It postulates, the exclusion of, the truth of the matter. All, for the sake of fairness. A perusal of the above provision reveals four salient pre conditions before invoking the rule of estoppel.
(i) Firstly, one party should make a factual representation to the other party.
(ii) Secondly, the other party should accept and rely upon the aforesaid factual representation.
(iii) Thirdly, having relied on the aforesaid factual representation, the second party should alter his position.
(iv) Fourthly, the instant altering of position, should be such, that it would be iniquitous to require him to revert back to the original position.
Therefore, the doctrine of estoppel would apply only when, based on a representation by the first party, the second party alters his position, ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 10 in such manner, that it would be unfair to restore the initial position."
.
14. That State is bound by its promise so meted out to a third party is a well known accepted principle.
The Constitution Bench of Supreme Court of India in Collector of Bombay Versus Municipal Corporation of the City of Bombay and others, A.I.R. (38) 1951 SC 469, had an occasion to deal with a case where Government of Bombay, vide resolution dated 19.12.1865 had approved the site and made a grant in favour of the Municipality for setting up the famous "Crawford market". The condition of the grant being no charge of rent. However Collector of Bombay raised demands of rent in terms of statutory provisions which came up for consideration before the Court. Despite dissent of one Hon'ble Judge (Justice Pitanjali Shastri, J) the most illustrious decision of holding the Government, on the doctrine of equity and fair play, to be bound by its promise, so made out to a third party, still holds the field. Hon'ble Justice Chandra Sekhara Aiyar, J, who though concurred with the majority, vide his separate opinion observed as under:-
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 11"Can the Government be now allowed to go back on the representation, and, if we do so, would it not amount to our countenancing the .
perpetration of what can be compendiously described as legal fraud which a Court of equity must prevent being committed? If the resolution can be read as meaning that the grant was of rent free land, the case would come strictly within the doctrine of estoppel enunciated in S. 115, Evidence Act. But even otherwise, that is, if there was merely the holding out of a promise that no rent will be charged in the future, the Government must be r deemed in the circumstances of this case to have bound themselves to fulfil it. Whether it is the equity recognized in Ramsden's case,[(1866) L.R.1 H.L.129] or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins C.J. in Dadoba Janardhan's case, 25 Bom. 714, a different conclusion would be "opposed to what is reasonable, to what is probable, and to what is fair".
Action of the Government in collecting revenue, despite rent free grant so made to the Municipality was held to be illegal.
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 1215. Refusal on the part of the authority to grant incentives to an assessee who acted upon the .
representations, so made in the Export Promotion Scheme was not found to be legal by the three Judges' Bench of Hon'ble Supreme Court of India in The Union of India and others Versus M/s Angelo Afghan Agencies etc., AIR 1968 SC 718, wherein they observed as under:-
"23. Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future r conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen. We agree with the High Court that the impugned order passed by the Textile Commissioner and confirmed by the Central Government imposing cut in the import entitlement by the respondents should be set aside and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports and Exports be directed to issue to the respondents import certificates for the total amount equal to 100 per cent of the f. o. b value of the goods exported by them unless ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 13 there is some decision which falls within Clause 10 of the Scheme in question."
[emphasis supplied] .
16. In Century Spinning and Manufacturing Company Limited and another Versus The Ulhasnagar Municipal Council and another, (1970) 1 SCC 582, Justice J.C. Shah, J. speaking for the Bench observed as under:-
"10. There is undoubtedly a clear distinction between a representation of an existing fact r and a representation that something will be done in future. The former may, if it amounts to a representation as to some fact alleged at the time to be actually in existence, raise an estoppel, if another person alters his position relying upon that representation. A representation that something will be done in the future may result in a contract, if another person to whom it is addressed acts upon it. A representation that something will be done in future is not a representation that it is true when made. But between a representation of a fact which is untrue and a representation express or implied - to do something in future, there is no clear antithesis. A representation that something will be done in future may involve an existing intention to act in future in the manner represented. If the representation is acted upon by another person it may, unless ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 14 the statute governing the person making the representation provides otherwise, result in an agreement enforceable at law; if the statute .
requires that the agreement shall be in a certain form, no contract may result from the representation and acting therefor but the law is not powerless to raise in appropriate cases an equity against him to compel performance of the obligation arising out of his representation.
11. Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice. The obligation arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promise: when the law requires that a contract enforceable at law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation if the contract be not in that form may be enforced against it in appropriate cases in equity. In Union of India v. M/s. Indo-Afghan Agencies Ltd., (1968) 2 SCR 366 this Court held that the Government is not exempt from the equity arising out of the acts done by citizens to their prejudice, relying upon the representations as to its future conduct made by the Government. This Court held that the ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 15 following observations made by Denning, J., in Robertson v. Minister of Pensions, (1949) 1 KB 227 applied in India.
.
"The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to better its future executive action".
We are in this case not concerned to deal with the question whether Denning, L. J., was right in extending the rule to a different class of cases as in Falmouth Boat Construction Co. Ltd., v.
Howell, (1950) 1 All ER 538, where he observed at page 542:
"Whenever Government officers in their dealings with a subject take on themselves to assume authority in a matter with which the subject is concerned, he is entitled to rely on their having the authority which they assume. He does not know, and cannot be expected to know, the limits of their authority, and he ought not to suffer, if they exceed it".
It may be sufficient to observe that in appeal from that judgment Howell v.Falmouth Boat Construction Co. Ltd, (1950) 1 All ER 538 Lord Simonds observed after referring to the observations of Denning, L J.:
"The illegality of an act is the same whether the action has been misled by an assumption of authority on the part of ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 16 a government officer however high or low in the hierarchy."* * * The question is whether the character of an act done in force of a statutory .
prohibition is affected by the fact that it had been induced by a misleading assumption of authority. In my opinion the answer is clearly: No".
12. If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice."
[emphasis supplied]
17. In M/s Motilal Padampat Sugar Mills Co. Ltd.
Versus State of Uttar Pradesh and others, (1979) 2 SCC 409, the Supreme Court of India had an occasion to consider the development of such law in England and America. Relying upon various pronouncements, including so rendered in Central London Property Trust India Limited Versus High Trees House Limited, (1956) 1 All ER 256: 1947 KB 130 and Combe Versus Combe, (1951) 2 KB 215: (1951) 1 All ER 767, the Court jurisprudentially advanced the principle of promissory estoppel in India, holding that it would not be enough ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 17 for the Government to just say that public interest so requires, hence be not compelled to carry out the .
promise. It further held that Government cannot be allowed to unilaterally repudiate the liability. Disclosure of circumstances, seeking exemption from such liability is must. Mere claim of change of Policy, ipso facto, would not be sufficient to exonerate the Government from its liability. If it makes a promise and the promissory acts, in relation thereupon and alters its position, like any other private individual, Government can be compelled to make good the promise. The Court further held that law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislature must, therefore, be to close the gap between the law and morality and bring about as near an approximation between the two as possible. The Court specially repelled the defence of executive necessity. It further held that Government would not be relieved of its obligation to honour the promise, so made, upon being established that the citizen had altered its position. The position stands ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 18 reiterated not only in Pournami Oil Mills and others Versus State of Kerala and another, 1986(Supp.) SCC .
728 but other decisions so rendered till date.
18. It is also a settled position of law that where promise is contrary to law, rule of promissory estoppel cannot be invoked for enforcement of such promise. It is also settled that while invoking the doctrine of promissory estoppel it is not necessary for the promissory to show that he suffered actual detriment.
[See: M/s Motilal Padampat Sugar Mills Co. Ltd. Versus State of Uttar Pradesh and others, (1979) 2 SCC 409; Kasinka Trading and another Versus Union of India and another, (1995) 1 SCC 274; Dr. Ashok Kumar Maheshwari Versus State of U.P. and another, (1998) 2 SCC 502; and Sharma Transport represented by D.P. Sharma Versus Government of A.P. and others, (2002) 2 SCC 188]
19. Legitimate expectation and promissory estoppel are two expressions having totally different connotations. It is also a settled principle of law that Government can, in the absence of manifest public interest, rescind from the promise, provided that no ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 19 one is put in adversial position which cannot be rectified. [See: Pawan Alloys and Casting (P) Ltd.
.
Versus U.P. SEB (1997) 7 SCC 251 and STO Versus Shree Durga Oil Mills, (1998) 1 SCC 572]
20. While dealing with the principle of legitimate expectation, reiterating its earlier view taken in Punjab Communications Ltd. Versus Union of India, (1999) 4 SCC 727, the apex Court in Bannari Amman Sugars Ltd. Versus Commercial Tax Officer and others, (2005) 1 SCC 625, held that:-
"14 ....... the change in policy can defeat a substantive legitimate expectation if it can be justified on "Wednesbury reasonableness". The decision-maker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of policy is for the decision-maker and not the court. The legitimate substantive expectation merely permits the court to find out if the change of policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made. A claim based on merely legitimate expectation without anything more cannot ipso facto give a right. Its uniqueness lies in the fact that it covers the entire span of time; present, past and future.::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 20
How significant is the statement that today is tomorrow's yesterday. The present is as we experience it, the past is a present memory and .
future is a present expectation. For legal purposes, expectation is not same as anticipation. Legitimacy of an expectation can be inferred only if it is founded on the sanction of law."
[emphasis supplied]
22. In State of Punjab Versus Nestle India Ltd. and another, (2004) 6 SCC 465, the rCourt had an occasion to deal with a case where the Chief Minister, in a public rally, made an announcement abolishing purchase tax on milk products. Pursuant thereto memo was also issued by the Financial Commissioner. In the absence of any formal notification the Court held such promise to be binding and effective.
21. In Mahabir Vegetable Oils (P) Ltd. and another Versus State of Haryana and others, (2006) 3 SCC 620, Court reiterated the principle of the doctrine of promissory estoppel operating in the legislative field.
The Court further observed that:-
"41. We may at this stage consider the effect of omission of said note. It is beyond any cavil ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 21 that a subordinate legislation can be given a retrospective effect and retroactive operation, if any power in this behalf is contained in the .
main Act. The rule making power is a species of delegated legislation. A delegatee therefore can make rules only within the four corners thereof."
22. In Sadan Petrochemical Industries Co. Ltd.
Versus Electricity Inspector and ETIO and others, (2007) 5 SCC 447, relying upon its earlier decisions in MRF Ltd. Versus Asstt. CST, (2006) 8 SCC 702 and Kasinka Trading Versus Union of India, (1995) 1 SCC 274, the Court held that :-
"....for instance, in a case where the right to exemption to tax for a fixed period accrues and the conditions for that exemption have also been fulfilled, the withdrawal of that exemption cannot affect the already accrued right".
23. The apex Court in Pawan Alloys and Casting Private Ltd., Meerut Versus U.P. State Electricity Board and others, (1997) 7 SCC 251, had an occasion to deal with a case where in order to promote industrial growth, incentive of 10% rebate on consumption of electricity charges, for a period of three years, was ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 22 sought to be provided. Acting on statutory notifications various entrepreneurs established their units.
.
However, arbitrarily and prematurely such incentives were withdrawn, which action came up for consideration before the Court. The Court observed that:-
"31. In the light of this settled legal position we, therefore, hold that even though the appellants have succeeded in convincing us that the earlier three notifications dated 29th October, 1982, 13th July, 1984 and 28th January, 1985 did contain a clear promise and representation by the Board to the prospective new industrialists that once they established their industries in the region within the territorial limits of the operation of the Board, they would be assured 10% rebate on the total bills regarding consumption of electricity by their industries for a period of three years from the initial supply of electric power to their concerns, the appellants will not be able to enforce the equity by way of promissory estoppel against the Board if it is shown by the Board that public interest required it to withdraw this incentive rebate even prior to the expiry of three years as available to the appellants concerned. It has also to be held that even if such withdrawal of development ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 23 rebate prior to three years is not based on any overriding public interest, if it is shown that by such premature withdrawal the appellants-
.
promisees would be restored to status quo ante and would be placed in the same position in which they were prior to the grant of such rebate by earlier notifications the appellants would not be entitled to succeed. We, therefore, now proceed to examine these twin aspects of the controversy".
Applying the ratio of law, to the factual matrix, the Court further held that:-
"35. Under these circumstances when no public interest was sought to be pressed in service by the Board for withdrawal of this incentive rebate, as seen earlier, the equity which had arisen in favour of the appellants remained untouched and undisturbed by any overwhelming and superior equity in favour of the Board entitling it to withdraw this development rebate in a premature manner leaving these promises high and dry before the requisite period of three years earlier guaranteed to them by way of development rebate had got exhausted. This takes us to the consideration of the second aspect of the matter.
36. As observed by this Court in Shrijee Sales Corporation [(1997) 3 SCC 398)] , even where there is no such overriding public interest it ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 24 might still be open to the promisor-State or its delegate to resile from the promise on giving reasonable notice which need not be a formal .
notice giving the promisee a reasonable opportunity of resuming his position, provided it is possible for the promisee to restore the status quo ante. Even on this aspect the respondent-Board has no case. It has not given any reasonable opportunity to the appellants to resume their earlier position. Nor is it shown by the Board that it is possible for the appellant- promisees to restore the status quo ante. The reason is obvious. Once the new industries were lured into establishing their factories in the region catered to by the Board on being assured three years guaranteed incentive of development rebate of 10% on their total bills of electricity charges and acting on the same once they had established their industries and spent large amounts for constructing the infrastructure and for employing necessary labour and for purchasing raw materials etc., it would be almost impossible for them to restore the status quo ante and to walk out midstream if the development rebate incentive was withdrawn for the unexpired period out of the three years' guaranteed period of currency of development rebate incentive. In fairness even it was not suggested by learned Senior Counsel for the respondents that on such withdrawal of development rebate the appellants would be ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 25 able to restore the status quo ante and walk out. He simply relied upon the ratio of the decision of this Court in the case of Shrijee .
Sales Corporation [(1997) 3 SCC 398)]for contending that it is the power of the Board to grant the rebate and it is equally the power of the Board to withdraw the same in its own discretion".
[emphasis supplied] Eventually action of the Board in prematurely withdrawing incentive development rebate so made available to the industries was quashed.
24. At this juncture, it be also observed that the said decision stands reiterated in A.P. Steel Re-Rolling Mills Ltd. Versus State of Kerala and others, (2007) 2 SCC 725 and on factual aspect, distinguished in Transmission Corporation of Andhra Pradesh Ltd. and another Versus Sai Renewable Power Pvt. Ltd. and others, (2011) 11 SCC 34, where the Court was dealing with an entrepreneur who had not fulfilled, within the prescribed time, requirements entitling him for such incentives and also contrary to the promises, parties had altered their position, by subsequently binding themselves with contractual agreements. State of ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 26 Arunachal Pradesh Versus Nezone Law House Assam, (2008) 5 SCC 609; Cauveri Coffee Traders, Mangalore .
Versus Hornor Resources (International) Co. Ltd., (2011) 10 SCC 420; and State of Haryana and others Versus Mahabir Vegetable Oils Pvt. Ltd., 2011(3) SCC 778 also deal with similar fact situation.
25. In LML Ltd. Versus State of Uttar Pradesh and others, (2008) 3 SCC 128, relying upon its earlier decision in Express Newspapers Pvt. Ltd. and others Versus Union of India and others, (1986) 1 SCC 133), Court observed that:-
"44. There can, however, be no doubt that ordinarily the doctrine of promissory estoppel would not be applied against statute. Sub-
section 6 of Section 24 of 1999 Act inter alia empower the holder of a licence, to modify the tariff. If the implementation of tariff was dependent upon fulfillment of certain conditions precedent which in turn would be dependent upon the capacity of the producer of electrical energy to fulfil the same, in our opinion, no impropriety was caused by the Power Corporation to ask for the said option. The fact, that such an option had indeed been called for and pursuant thereto the consumers had altered their position is not in dispute. While ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 27 dealing with a question as to whether an action on the part of the State to make a representation is contrary to a statute or not, in .
our opinion, a distinction should be borne in mind between an act which goes clearly contrary to the mandatory provisions thereof and a case where irregularities have been committed".
[emphasis supplied]
26. In U.P. Power Corporation Ltd. and another Versus Sant Steels and Alloys (P) Ltd. and others, (2008) 2 SCC 777, Court had the occasion to deal with a case where such of those entrepreneurs who had set up new industrial units were made entitled to 33.33% hill development rebate on the electricity bill, for a period of five years. By way of subsequent notification it was reduced to 17%. Holding such action to be illegal, the Court held that:-
"32. No person can be permitted to misuse the concession or benefit and invoke promissory estoppel. Promissory estoppel is not one sided affair, it is rather two sided affair. If one party abuses the concession then it is always open to the other party to revoke such concession but if one party avails the benefit and is acting on the same representation made by the other party ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 28 then the other party who has granted the said benefit cannot revoke the same under the garb of public interest. Therefore the grounds that .
the revocation notification was issued in public interest and that same has the flavour of the statute, cannot persuade us to uphold it.
sustained."
............ .......... ........
"35. In this 21st century, when there is global economy, the question of faith is very important. Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers.
Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the shortsightedness of the governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant-Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 29 induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith".
.
[emphasis supplied]
27. This principles stand reiterated in Pepsico India Holdings Pvt. Ltd. Versus State of Kerala and others, (2009) 13 SCC 55.
28. Again in Collector, District Gwalior and another Versus Cine Exhibitors Private Limited and another, (2012) 4 SCC 441, the Court reiterated the principle that there can be no promissory estoppel against the legislature in the exercise of its legislative functions nor can the Government or the public authority be debarred by promissory estoppel from enforcing a statutory prohibition. Also promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make.
29. In Monnet Ispat and Energy Ltd. Versus Union of India and others, (2012) 1 SCC 1, the Court ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 30 culled out the following principles for invoking the doctrine of promissory estoppel:-
.
1. Where one party has by his words or conduct made to the other clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is, in fact, so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be r inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not.
2. The doctrine of promissory estoppel may be applied against the Government where the interest of justice, morality and common fairness dictate such a course. The doctrine is applicable against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. However, the Government or even a private party under the doctrine of promissory estoppel cannot be asked to do an act prohibited in law. The nature and function which the Government discharges is not very relevant. The Government is subject to the rule ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 31 of promissory estoppel and if the essential ingredients of this doctrine are satisfied, the Government can be compelled to carry out the .
promise made by it.
3. The doctrine of promissory estoppel is not limited in its application only to defence but it can also furnish a cause of action. In other words, the doctrine of promissory estoppel can by itself be the basis of action.
4. For invocation of the doctrine of promissory estoppel, it is necessary for the promisee to show that by acting on promise made by the other party, he altered his position. The alteration of position by the promisee is a sine qua non for the applicability of the doctrine. However, it is not necessary for him to prove any damage, detriment or prejudice because of alteration of such promise.
5. In no case, the doctrine of promissory estoppel can be pressed into aid to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. No promise can be enforced which is statutorily prohibited or is against public policy.
6. It is necessary for invocation of the doctrine of promissory estoppel that a clear, sound and positive foundation is laid in the petition. Bald assertions, averments or allegations without ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 32 any supporting material are not sufficient to press into aid the doctrine of promissory estoppel.
.
7. The doctrine of promissory estoppel cannot be invoked in abstract. When it is sought to be invoked, the Court must consider all aspects including the result sought to be achieved and the public good at large. The fundamental principle of equity must forever be present to the mind of the court. Absence of it must not hold the Government or the public authority to r its promise, assurance or representation.
Principles of Interpretation of Fiscal Legislation
30. It is a settled principle of law that notification of exemption is to be given literal meaning and interpreted as such. Recourse to the principles of interpretation of Statutes should be resorted to only in the event of any anomaly or absurdity. Such notification must be construed having regard to the purpose and object it seeks to achieve.
31. That tax laws and fiscal legislations need to be interpreted strictly and ambiguity, if any, must be resolved against imposition of tax, stands settled by the Constitution Bench of Supreme Court of India in ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 33 Commissioner of Income Tax (Central) - I, New Delhi Versus Vatika Township Pvt. Ltd., (2015) 1 SCC 1. The .
relevant extract of the opinion so authored by Hon'ble Mr. Justice A.K. Sikri, J., is as under:-
"41. We would like to embark on a discussion on some basic and fundamental concepts, which would shed further light on the subject matter:
41.1 No doubt, there is no scope for accepting the Libertarian theory which postulates among others, no taxation by the State as it amounts r to violation of individual liberty and advocates minimal interference by the State. The Libertarianism propounded by the Australian-
born economist philosopher Friedrich A. Hayek and American economist Milton Friedman stands emphatically rejected by all civilised and democratically governed States, in favour of a strongly conceptualised "welfare state". To attain a welfare state is our constitutional goal as well, enshrined as one of its basic feature, which runs through our Constitution. It is for this reason, specific provisions are made in the Constitution, empowering the legislature to make laws for levy of taxes, including the income-tax. The rationale behind collection of taxes is that revenue generated therefrom shall be spent by the governments on various developmental and welfare schemes, among others.
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 3441.2 At the same time, it is also mandated that there cannot be imposition of any tax without the authority of law. Such a law has to be .
unambiguous and should prescribe the liability to pay taxes in clear terms. If the provision concerned of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This is a well established principle of statutory interpretation, to help finding out as to whether particular category of assessee is to pay a particular tax or not. No doubt, with the application of this principle, the Courts make endeavour to find out the intention of the legislature. At the same time, this very principle is based on "fairness"
doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax. This principle also acts as a balancing factor between the two jurisprudential theories of justice --- Libertarian theory on the one hand and Kantian theory along with Egalitarian theory propounded by John Rawls on the other hand.
41.3 Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 35 any ambiguity must be resolved against imposition of the tax. In Billings v. United States, 232 US 261 (1914) the Supreme Court .
clearly acknowledged this basic and long-
standing rule of statutory construction:
"Tax Statutes . . . should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favor of the citizen.
Eidman v. Martinez, 184 US 578 (1902); United States v. Wigglesworth, 2 Story, 369 (1842); and Mutual Benefit Life Ins.
Co. v. Herold, 198 Fed 199 (1912), affirmed in Herold v. Mutual Benefit Life Insurance Co. 201 Fed 918; Parkview Bldg. and Loan Assn. v. Herold, 203 Fed 876; and Mutual Trust Co. v. Miller, 177 N.Y. r 51."
41.4 Again, in United States v. Merriam, 263 US 179 the Supreme Court clearly stated at pp. 187-88:
"On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151 (1917)."
41.5 As Lord Cairns said many years ago in Partington v. Attorney- General,1869 LR 4 HL 100:
"......as I understand the principle of all fiscal legislation it is this : If the person ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 36 sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if .
the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.""
[emphasis supplied]
32. In Commissioner of Central Excise, Surat -I Versus Favourite Industries, (2012) 7 SCC 153, the apex Court held that:-
r "35. The notification requires to be interpreted in the light of the words employed by it and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural meaning, when the wordings are simple, clear and unambiguous.
36. In Commissioner of Customs v. Rupa & Co.
Ltd., (2004) 6 SCC 408, this Court has observed that the exemption notification has to be given strict interpretation by giving effect to the clear and unambiguous wordings used in the notification. This Court has held thus:
"7. ..... However, if the interpretation given by the Board and the Ministry is clearly erroneous then this Court cannot ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 37 endorse that view. An exemption notification has to be construed strictly but that does not mean that the object and purpose of the notification is to be .
lost sight of and the wording used therein ignored. Where the wording of the:
notification is clear and unambiguous, it has to be given effect to. Exemption cannot be denied by giving a construction not justified by the wording of the notification. "
[Emphasis supplied] ....... ..... ....
41. In Commissioner of Customs (Preventive), Gujarat v. Reliance Petroleum Limited, (2008) 7 SCC 220, this Court has held:
"30. We are not oblivious of the proposition of law that an exemption notification should be construed directly but it is also well settled that interpretation of an exemption notification would depend upon the nature and extent thereof. The terminologies used in the notification would have an important role to play. Where the exemption notification ex facie applies, there is no reason as to why the purport thereof would be limited by giving a strict construction thereto.
31. The comparison made by the learned Solicitor General that mobility of a person would depend upon his personal fitness and not when he is placed on a wheelchair, in our opinion, is not apposite. The purpose of grant of exemption is different. The object for grant of notification shall be considered in a broad based manner. The wordings used therein have to be given their natural meaning. The purpose must ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 38 be allowed to be achieved, The words "all types of materials" should be construed widely."
[Emphasis supplied] .
42. Moreover, a liberal construction requires to be given to a beneficial notification. This Court in Commissioner of Customs (Preventive), Mumbai v. M. Ambalal and Company, (2011) 2 SCC 74, (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation:
r "16. It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted.
This composite rule is not stated in any particular judgment in so many words. In fact, majority of judgments emphasise that exemptions are to be strictly interpreted while some of them insist that exemptions in fiscal statutes are to be liberally A interpreted giving an apparent impression that they are contradictory to each other. But this is only apparent. A close scrutiny will reveal that there is no real contradiction amongst the judgments at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 39 with each other because they relate to two different sets of circumstances."
.
43. In Commissioner of Sales Tax v. Industrial Coal Enterprises, (1999) 2 SCC 607, this Court has observed thus:
"11. In CIT v. Straw Board Mfg. Co. Ltd. , 1989 Supp(2) SCC 523, this Court held that in taxing statutes, provision for concessional rate of tax should be liberally construed. So also in Bajaj Tempo Ltd. v. CIT, (1992) 3 SCC 78, it was held that provision granting incentive for promoting economic growth and development in taxing statutes should be liberally construed and r restriction placed on it by way of exception should be construed in a reasonable and purposive manner so as to advance the objective of the provision."
33. An exemption notification should be given a literal meaning. Recourse to other principles or canons of interpretation of statute should be resorted to only in the event when it gives rise to anomaly or absurdity.
The exemption notification must be construed having regard to the purpose and object it seeks to achieve.
[Vadilal Chemicals Ltd. v. State of A.P. and Others, (2005) 6 SCC 292].
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 4034. Applying the aforesaid principles to the given fact situation, we are not inclined to uphold the .
action of the respondents.
35. Language of Section 11 of the Act is clear.
All exemptions are regulated by the Act and have to be only in terms of the notifications issued by the State.
36. In our considered view, notification dated 27.07.2012 (Annexure PB), so issued in public interest, is in two parts. (i) It entitles all new industrial units established/coming up after 01.04.2012 for an exemption of 5% on the electricity duty for a period of 5 years. (ii) It clarifies the rates at which the assessees are required to pay the duty.
37. Notification dated 17.08.2012 (Annexure PC) only reduces the rate of electricity duty for industrial consumers, form 20% to 17%. Noticeably this notification only deals with the category of consumers to which the petitioner belongs, i.e. large industrial consumers having connected load of more than 100 KW. Hence necessarily applies to the petitioner.
38. Notification dated 04.03.2014 (Annexure PC-1) deals with all categories of consumers, including ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 41 the category to which petitioner belongs, qua whom there is further reduction of duty from 17% to 13% .
w.e.f. 1.4.2014. Crucially this notification is in partial modification and not in supersession of all earlier notification(s).
39. Subsequent notifications only deal with the rate at which the duty is to be levied on the consumers. It certainly does not withdraw the exemption so provided in terms of earlier notification dated 27.07.2012 (Annexure PB). Language of the notifications is unambiguously clear. Also their applicability is nowhere confined to large scale units established in the State of Himachal Pradesh prior to 01.04.2012. To the contrary, it states that reduction in electricity duty is "in respect of all Industrial Units".
Conjoint reading of these notifications, leaves no scope of any other interpretation. Language is clear, simple and understandable. The only irresistible conclusion being that petitioner shall be levied duty, on the rates so prescribed in the notifications, upon which he would be entitled to rebate @ 5%, being the component, falling under the exemption clause.
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 4240. Insofar as petitioner is concerned, Annexures PC and PC-1 only reduces the duty levied on .
the electricity charges. In fact with respect to other category of consumers, so mentioned at Sr. No. 4 to 7, incentives are provided for a fixed term.
41. Applying the principles of Interpretation of Fiscal Legislation there can be no other interpretation.
42. Acceptance of the stand, so taken by the State would not only result into arbitrariness but also lead to invidious indiscrimination qua the petitioner.
Benefit to be conferred only upon the likes of petitioner would not only be withdrawn but also conferred upon ineligible persons. The stand of the State cannot be accepted, more so, in the absence of any material to even prima facie show that notifications (Annexures PC and PC-1) were meant to be applied only to units established prior to 01.04.2012. Intent is to reduce the rate of duty from 20% to 13% qua all units established either prior or subsequent to 01.04.2012. But however, insofar as, rebate/incentive/exemption is concerned, neither it stands withdrawn nor has it been made applicable to old units.
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 4343. It is not the pleaded case of the respondent that incentives, so granted in terms of notification .
(Annexure PB) stand withdrawn. Also there is no material placed on record to such effect. Notifications (Annexures PC and PC-1) do not supersede or make earlier notification redundant. Already accrued right of the petitioner cannot be prematurely and unilaterally withdrawn without any public interest and that too in utter disregard of principles of natural justice. It is violative of not only Article 14 but also Articles 19 and 21 of the Constitution of India. Any other construction would lead to absurdity, more so, in the absence of any material on record.
44. Acting on the representations of the State, providing incentives to new industrial units, petitioner made large investments and after establishing its unit, made it fully functional and operational, within a time bound period. There is no lapse on the part of the petitioner in either adhering to or complying with any of the Policies or statutory rules/regulations. Any other interpretation would not only render the notification (Annexure PB) to be otiose but, in fact, do violence to ::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 44 the Industrial Policy, intended to encourage investment and augment industrial growth within the State.
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45. Incentives specially conferred on new units with the avowed object of industrial growth cannot be withdrawn in the manner in which the respondent wants the Court to believe and agree with. Acceptance of submission of the respondent would lead to an odious position, rendering the Industrial Policy to be nugatory. The Government sought for increase in industrial development in the State. Such a benevolent act on the part of the State, unless there exists any statutory interdict, should be given full effect. There is nothing on record to show that old industrial units were required to be given a fillip. Also there is no change in the policy.
46. Principles laid down in Collector of Bombay (supra) and M/s Motilal Padampat (supra) are squarely applicable in the instant case. In fact, petitioner's case is squarely covered by the fact situation and law laid down in Pawan Alloys (supra); Sant Steels (supra);
Vatika Township (supra); and Favourite Industries (supra).
::: Downloaded on - 15/04/2017 17:58:16 :::HCHP 4547. The transaction in question being commercial in nature, we see no reason as to why .
petitioner be not awarded interest, more so, when respondents did not effectively deal with the grievance so made by the petitioner.
48. Thus, in our considered view, stand taken by the respondents cannot be said to be equitable, just, fair and legal. Points raised are answered accordingly. Consequently, writ petition is allowed holding the petitioner entitled to the following reliefs:-
(a) Petitioner is entitled to rebate @ 5% on the rates of electricity duty so prescribed by the respondent from time to time, more particularly in terms of notifications dated 27.07.2012, 17.08.2012 and 04.03.2014, Annexures PB, PC and PC-1, respectively;
(b) The amount of duty paid in excess by the petitioner shall be adjusted towards all future demands;
(c) Petitioner shall be entitled to interest @ 12% per annum (simple), on all such amounts, which shall also be adjusted towards future demands.
::: Downloaded on - 15/04/2017 17:58:17 :::HCHP 46(d) Parties to reconcile the accounts within four weeks.
.
In the given facts and circumstances, no order as to costs.
Pending application(s), if any, also stand disposed of.
r to (Sanjay Karol),
Judge.
(P.S. Rana),
April 8 , 2015(PK) Judge.
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