Andhra HC (Pre-Telangana)
Andhra Pradesh Rayons Limited And Anr. vs Government Of Andhra Pradesh And Ors. on 29 November, 1991
Equivalent citations: [1994]92STC412(AP)
Author: P. Venkatarama Reddi
Bench: P. Venkatarama Reddi
JUDGMENT P. Venkatarama Reddi, J.
1. In these two writ petitions filed by a public limited company and its shareholder, the question that falls for consideration is whether the petitioner is entitled to Rs. 100 lakhs interest-free sales tax loan by virtue of the orders issued by the State Government in G.O. Ms. No. 483, Industries and Commerce Department, dated September 9, 1986.
2. The petitioner-company manufactures rayon grade pulp. The industrial unit of the petitioner is located in a backward area, in the village of Kamalapuram, Warangal district. The petitioner commenced its production from September 1, 1981. The State Government, by G.O. Ms. No. 224, Industries and Commerce Department, dated March 9, 1976, offered certain incentives for the new industries which go into regular production on or after January 1, 1976 and also to those industries which go in for "substantial expansion" after that date. Investment subsidy and interest-free sales tax loan are the two incentives that were announced therein. We are not concerned in these writ petitions with investment subsidy which is granted to the industries set up in backward areas and the Scheduled (tribal) areas. As far as interest-free sales tax loan is concerned, the relevant portion of the Government order is extracted hereunder :
"State Government will give an interest-free sales tax loan to all new industrial units and/or those going in for substantial expansion in all the areas excepting the municipal limits of Hyderabad and Secunderabad, Vijayawada and Visakhapatnam. Entrepreneurs setting up industries will be eligible for interestfree sales tax loan equal to the tax paid by them under the Andhra Pradesh General Sales Tax Act if any on construction materials, plant and machinery and equipment during the pre-production stage and purchase tax/sales tax amount paid by them under the Andhra Pradesh General Sales Tax Act, 1957 and sales tax paid by them under the Central Sales Tax Act, 1956, during the period of 5 years from the date of going into regular production, on raw materials, components and finished goods. This can be claimed annually. The total claim for all years put together will be limited to 10 per cent of the fixed capital cost. Each year's loan is repayable in full at the end of the tenth year from the date of drawing the loan ......
These incentives will be in operation for a period of 5 years from January 1, 1976. The committee will review the implementation of the scheme and suggest changes or modifications as are necessary from time to time for approval of the Government.
These incentives are available for new units going into regular production on or after January 1, 1976. Units which went into production prior to January 1, 1976 and who are eligible to avail themselves of the incentives under G.O. Ms. No. 1225, Industries and Commerce dated December 31, 1968 and G.O. Ms. No. 455, Industries and Commerce dated May 3, 1971 must register with the Director of Industries within 3 months from the date of issue of this order to avail themselves of the incentives offered in the above two G.O."
3. The scheme of incentives introduced by the aforementioned Government Order was extended from time to time till March 31, 1984. It is the case of the petitioner that the petitioner established its industry in a remote backward area relying upon the incentives and concessions offered by the State Government by the aforementioned Government Order and certain other Government Orders. The petitioner avers that the State Government has made a promise to extend these benefits and based upon the promise, the shareholders and promoters of the company came forward to invest in the company. It appears that during the year 1982, the State Level Committee constituted under G.O. Ms. No. 224 sanctioned interest-free sales tax loan only to the extent of Rs. 1O lakhs, whereas, according to the petitioner, a loan of Rs. 273 lakhs should have been sanctioned. It appears that the petitioner had been making representations to the Government in this behalf. Ultimately, the Government of Andhra Pradesh issued G.O. Ms. No. 483 (Industries and Commerce IA Department) dated September 9, 1986. Relevant portion of the said G.O. reads thus :
"The company have been repeatedly representing to Government to provide the concessions as sought for by them above on the ground that the economic viability of the project, as assessed by the financial institutions, has been greatly affected due to non-receipt of the aforesaid concessions as sought for by them.
The above representations of the company have been examined in detail by the Government keeping in view the financial position of the State Government as well as the company's need for those concessions from the point of view of its economic viability in the context of the appraisal of the financial institutions. Discussions have also been held between the representatives of the company and the Government in the interest of reaching a comprehensive negotiated settlement on the above issues in order to end the uncertainty over these issues in the interest of smooth running of industry since delays and litigation on such matters would be detrimental to the interest of the smooth running of industry. The company has stated that they have not filed cases against the Government on these issues. The issues have been examined by the Government in the light of the above, and the following agreement has been reached between the Government and the company as enumerated below :
(1) Interest-free sales tax loan : The total quantum of interest-free sales tax loan eligible under G.O. Ms. No. 224, Industries and Commerce Department dated March 9, 1976 would be limited to a figure of Rs. 100 lakhs and this amount would be allowed to be retained by the company in a period of 2 years by retaining the sales tax payable by them, subject to the condition that the amount retained towards interest-free sales tax loan does not exceed Rs. 50 lakhs in a year. Each year's loan is repayable in full at the end of the tenth year from the date of drawing the loan ..........
After detailed examination as mentioned above and in the light of the declaration made by the company that they have not filed any court cases, the comprehensive settlement on the above lines is hereby accepted by the Government subject to the company furnishing an undertaking to the Commissioner of Industries that they will not resort to litigation against the Government on these issues.
(By order and in the name of the Governor of Andhra Pradesh)."
4. After the G.O. was issued, the petitioner states that it availed of the loan sanctioned under the G.O. by not remitting the sales tax dues in respect of the period November, 1986 to January, 1988, by adjusting the same towards the eligible loan amount and that no objection was raised by the sales tax authorities for such adjustment.
5. While so, the State Legislature enacted the Andhra Pradesh Interest-free Sales Tax Loans for Industries (Imposition of Ceiling) Act, 1987, hereinafter referred to as "the A.P. Act 20 of 1987". This Act repeals the Ordinance containing similar provisions which was promulgated on February 9, 1987. Section 3 of the A.P. Act 20 of 1987 fixes a ceiling of Rs. 10 lakhs for the interest-free sales tax loan which an industry can get in terms of G.O. Ms. No. 224, dated March 9, 1976. The Act was given retrospective effect from January 1, 1976. Section 3 of the Act which is relevant reads as follows :
"Notwithstanding anything in any judgment, decree or order of any court, tribunal or other authority or any order to the contrary, the maximum amount of interest-free sales tax loan granted as an incentive to the new industries which have gone into regular production on or after the 1st January, 1976 and those industries which go in for substantial expansion situated in all the areas of the State of Andhra Pradesh excepting in the municipal corporation limits of Hyderabad, Vijayawada and Visakhapatnam in terms of G.O. Ms. No. 224, Industries and Commerce Department, dated the 9th March, 1976, as extended from time to time till the 31st March, 1984, shall not exceed a sum of rupees ten lakhs in respect of each industry with a fixed capital cost of rupees one crore and above."
6. The preamble of the Act sets out the background in which the Act was passed. Inter alia, it is stated that the financial commitment will be up to Rs. 46 crores if the claim for the loans is limited to 10 per centum of the fixed capital cost instead of limiting it to Rs. 10 lakhs as suggested by the State Level Committee. It is then stated that the total outlay provided cannot meet the demands if the claim is not limited to a maximum of Rs. 10 lakhs and that the State is not in a position to meet such huge commitment in view of the financial constraints.
7. After the A.P. Act 20 of 1987 came into force the Commercial Tax Officer, Company Circle, Secunderabad Division, issued a notice dated February 8, 1988 calling upon the petitioner to pay the sales tax dues to the tune of Rs. 75,68,217 in respect of the assessment years 1986-87 and 1987-88 (up to December, 1987). The Commercial Tax Officer took the stand that in view of the enactment of A.P. Act 20 of 1987, the benefit given in G.O. Ms. No. 483, dated September 9, 1986, is superseded and the petitioner is eligible to avail of the loan amount only to the extent of Rs. 10 lakhs. Assailing the legality of this notice and also challenging the provisions of the A.P. Act 20 of 1987, the Writ Petition No. 3887 of 1988 has been filed. A consequential direction to the respondents to implement G.O. Ms. No. 483, dated September 9, 1986, has also been sought for.
8. Writ Petition No. 5801 of 1990 has been filed questioning the demand notice dated March 3, 1990, issued by the Commercial Tax Officer demanding a sum of Rs. 35.31 lakhs as a result of final assessment made for the year 1987-88 under the Central Sales Tax Act. In this writ petition also the petitioner has challenged the provisions of the A.P. Act 20 of 1987 and sought for a direction to implement G.O. Ms. No. 483, dated September 9, 1986.
9. As far as the constitutional validity of the A.P. Act 20 of 1987 is concerned, the points raised in this behalf are squarely covered by the Division Bench judgment of this Court in Writ Petition Nos. 1861 of 1982, etc., dated March 10, 1988 (Reported as sree Rayalaseema paper Mills Ltd. v. Government of Andhra Pradesh [1991] 81 STC 458 (AP)). The challenge based upon articles 14 and 19(1)(g) of the Constitution of India was repelled by the Division Bench. The Division Bench held that the enactment was conceived in public interest with a view to tide over the financial stringency. The Division Bench also negatived the plea of promissory estoppel observing that "there can be no promissory estoppel against the exercise of legislative power". Referring to the case of State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. AIR 1973 SC 2734 the Division Bench observed that there can be no surrender of legislative powers to be used for public good so as to prevail over any obligations arising out of the principles of equitable estoppel. However, the learned counsel for the petitioner, Sri Chennabasappa Desai, has again raised the very same contention before us though it was rejected by the Division Bench in the aforementioned case. In view of the well-settled principles governing the application of the doctrine of "promissory" or "equitable" estoppel as laid down in various judgments of the Supreme Court, we are of the view that the ratio of the judgment of the Division Bench cannot be doubted on this aspect. The observations made by the Supreme Court in a recent case reported in Vasantkumar Radhakisan Vora v. Board of Trustees of the Port of Bombay AIR 1991 SC 14, are quite apposite in this connection. K. Ramaswamy, J., speaking for the Bench observed :
"It is equally settled law that the promissory estoppel cannot be used compelling the Government or a public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority, for having regard to the facts as they have transpired that it would be inequitable to hold the Government or public authority to the promise or representation made by it .....
Though executive necessity is not always a good defence, this doctrine cannot be extended to legislative acts or to acts prohibited by the statute."
10. In Union of India v. Godfrey Philips India Ltd. [1986] 59 Comp Cas 526 (SC); AIR 1986 SC 806, Bhagwati, C.J., pointed out that "there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition".
11. As already noticed the A.P. Act 20 of 1987 was given retrospective effect from January 1, 1976. The plain and obvious effect of such retrospective operation is that the provision contained in section 3 of the A.P. Act 20 of 1987 must be treated to have been in existence right from January 1, 1976. If so, in view of the legislative mandate embodied in section 3 of the A.P. Act 20 of 1987, it is not possible to give a direction to implement the promises made by the Government as it would amount to giving a direction contrary to a legislative provision.
12. Learned counsel for the petitioner, Sri Desai, invited our attention to the decision of the Supreme Court in Vij Resins Pvt. Ltd. v. State of J & K. AIR 1989 SC 1629 and particularly the observations at paragraph 25 of the said judgment. But the facts of the case and the underlying ratio of the said judgment is altogether different. The ultimate decision rests on the conclusion that the impugned Act suffers from the vice of taking away rights to property without providing for compensation and is therefore hit by article 31(2) of the Constitution. Article 31 having been deleted now from the Constitution, no reliance can be placed on the said judgment.
13. We must now refer to the core of the argument of the learned counsel for the petitioner Sri Chenna Basappa Desai. The learned counsel submits that the A.P. Act 20 of 1987 has no application to the petitioner's case and hence there is room to apply the principle of promissory estoppel and to grant necessary relief based thereon. In amplification of his argument, learned counsel argues that G.O. Ms. No. 483, dated September 9, 1986, in ultimate analysis, embodies the settlement arrived at between the petitioner and the Government taking into account all the relevant aspects and the benefits flowing as a result of such negotiated settlement are quite independent of G.O. Ms. No. 224, dated March 9, 1976. Learned counsel further submits that the life of G.O. Ms. No. 224, dated March 9, 1976, came to an end by March 31, 1984, whereas G.O. Ms. No. 483 came to be issued much later and therefore one cannot be related to the other. However, we are unable to view the G.O. dated September 9, 1986, in that light. It is true that section 3 of the A.P. Act 20 of 1987 has been enacted with a view to limit the benefit conferred by G.O. Ms. No. 224, dated March 9, 1976, vis-a-vis, interest-free sales tax loan. The phraseology - "in terms of G.O. Ms. No. 224" makes this position clear. Still, the question is whether any benefit has been conferred under G.O. Ms. No. 483, de hors the earlier G.O., namely, G.O. Ms. No. 224. We are of the view that by issuing G.O. Ms. No. 483 dated September 9, 1986, the Government did not confer any independent or additional benefit outside the purview and framework of G.O. Ms. No. 224, dated March 9, 1976. Although G.O. Ms. No. 224 lapsed by March 31, 1984, the claims preferred and registered under G.O. Ms. No. 224 were liable to be dealt with in terms of that G.O., notwithstanding its discontinuance with effect from March 31, 1984. It is fallacious to contend that after March 31, 1984 the pending claims stood abated or became infructuous. Let us take a case where the claim had not been disposed of for reasons beyond the control of the applicant. Even in such a case, if we take the view that the claim abated on and from April 1, 1984, it would lead to anomalous and unjust results. We cannot therefore countenance the argument that whatever was done after March 31, 1984, could not be pursuant to G.O. Ms. No. 224. In this context, it is relevant to take note of the fact that in G.O. Ms. No. 375, dated August 23, 1985, which is again a G.O. extending certain incentives to the industrial units set up in specified backward areas, it is specifically stated that the registration of the claims under G.O. Ms. No. 224, dated March 9, 1976, continued till August 29, 1983. In the present case, admittedly, the petitioner preferred its claim much prior to March 31, 1984 and on account of some dispute as to the quantum of loan to be given to the petitioner, the matter was kept pending till the year 1986 when G.O. Ms. No. 483 came to be issued. What the State Government has done by issuing G.O. Ms. No. 483 on September 9, 1986, was to quantify the benefit of interest-free sales tax loan allowable to the petitioner in the light of G.O. Ms. No. 224 dated March 9, 1976. Instead of giving the full benefit as contemplated by G.O. Ms. No. 224 and as claimed by the petitioner, the State Government by a process of negotiations with the petitioner settled the amount of Rs. 100 lakhs against the petitioner's claim of Rs. 273 lakhs. It may be that the quantum of eligible loan amount has been reduced by way of mutual understanding but the benefit so conferred was traceable to G.O. Ms. No. 224 only. It was not something alien to or independent of the scheme of incentives envisaged by G.O. Ms. No. 224. No facts or circumstances precluding the applicability of G.O. Ms. No. 224 to the petitioner's case have been brought to our notice. In our judgment, G.O. Ms. No. 483 worked out the actual figure of interest-free sales tax loan that has to be extended to the petitioner in terms of G.O. Ms. No. 224 by means of a negotiated settlement with a view to give a quietus to the possible litigation in that regard. It may be a settlement in one sense, as contended by the learned counsel; yet, in another sense, it can be regarded as an order giving effect to G.O. Ms. No. 224. Viewed in that light, we are unable to hold that section 3 of the A.P. Act 20 of 1987 has no application to the case of the petitioner. If A.P. Act 20 of 1987 applies - as, in our view, it ought to apply, the question of enforcing G.O. Ms. No. 483 dated September 9, 1986, by having recourse to the principle of promissory estoppel or otherwise does not arise. We, therefore, reject the contention of the petitioner and hold that section 3 of the A.P. Act 20 of 1987 fully applies to the petitioner's case and the Act having come into force with retrospective effect from January 1, 1976, it is not legally possible to grant a direction to extend the benefit conferred by G.O. Ms. No. 224, dated March 9, 1976, read with G.O. Ms. No. 483, dated September 9, 1956, contrary to the above legislative provision, the validity of which has already been upheld by this Court. The demands raised by the Commercial Tax Officer (third respondent) are therefore valid in law. Of course, it is open to the petitioner to question the assessment orders and demands on any other grounds.
14. Writ petitions are, therefore, dismissed but in the circumstances without costs. Government Pleader's fee Rs. 200 in each case.
15. Writ petitions dismissed.