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2002 DIGILAW 222 (JK)

K. C. Paint Factory v. State Of J. &K.

2002-07-23

S.K.GUPTA, V.K.JHANJI

body2002
1. We have heard Mr. Subash Dutta, learned counsel for the appellant, in extenso. 2. At all material times, the appellant was Small Scale Industrial Unit engaged in the manufacture of rosin and turpentine. The unit standard manufacturing the product on 25-03-1982 by taking additional line during the period SRO-671 dated 18.12.1979 issued by the Government provided that exemption for a period of ten years from the date of commencement of the manufacture of the goods to the goods to the SSI units. The appellant, thus enjoyed Sales Tax exemption in terms of the aforesaid notification on the sales locally effected in the State. The appellant was also exempted from payment of Sales Tax on its inter-state sale of rosin and turpentine vide notification SRO-489 issued by the Government on 18-8-1977, which further came to be extended from time to time by issuing various notifications and giving them retrospective effect upto September, 1982. On 31-3-1984. Government issued notifications SROs-118 and 119 whereby exemption was granted to SSI Units retrospectively from 1st October, 1982 on their inter-state sales except on the items placed in the Negative List, which also included rosin and turpentine manufactured by the appellant™s SSI Unit. Since the item manufactured by the appellant in its SSI Unit was put on Negative List the grant of exemption of inter-state sales of rosin and turpentine from payment of Central Sales Tax for the period effective from 01-10-1982 to 31-03-1984 was refused. Further case of the appellant is that, on its local sales, exemption has been granted from payment of Sales Tax from the period 01-10-1982 to 31-03-1984 and clearly shows that the goods manufacture by the appellant were admitted as entitled to exemption in public interest. The denial of exemption, in such circumstances, for the period from 01.10.1982 to 31.03.1984 on inter-State sales from payment of Central Sales Tax is clearly not in public interest. It is also pleaded by the appellant that by issuing notification No.86 dated 04-04-1995 the Government again granted exemption on inter-State sales of rosin and turpentine which evidently shows that such exemption was granted in public interest. The action of the Government in putting the rosin and turpentine on Negative List by SRO-119 when sold on inter-state basis, according to the appellant, is without any justification. According to the appellant. The action of the Government in putting the rosin and turpentine on Negative List by SRO-119 when sold on inter-state basis, according to the appellant, is without any justification. According to the appellant. The exemptions are being granted under the State Taxation Law under various notifications in the manner and to the extent and for the period as specified therein. 3. Further fact putforth by the appellant is that, when exemption has been granted under the General Sales Tax Act, neither there was any ground nor any justification to not grant similar exemption under the Central Sales Tax Act/Laws. That the exemptions were earlier granted also not to the Central Sales Tax and the petitioner acting on a bonafide plea reasonably expected that the said exemption would be ranted for the period for which the exemption was granted under the General Sales Tax Act and, thus, cannot be saddled with the tax liability. Appellant further stated with the tax liability. Appellant further stated to have when acted upon assurances and promises and the notifications issued by the Government from time to time, set up an SSI Unit and started production of reson and turpentine oil, the State is bound by the Doctrine of promissory Estoppel and also on the ground that SRO-267 dated 15-05-1997 in which it was specifically provided that the exemption would be available to the SSI Units for a period of ten years, and cannot withdraw such exemption regarding Sales Tax on rosin and turpentine, as the appellant had changed its position to its detriment on being induced by such assurances and promises given by the Government. It is also stated that the decision of the Government putting the goods manufactured by SSI Unit of the appellant in Negative List and holding not entitled to exemption during the period from 01-10-1982 to 31-03-1984 by issuing SROs-118 and 119, is arbitrary without basis and cannot be sustained. 4. The learned single Judge having examined the grievances of the appellant/ writ petitioner, as projected in the writ petition, on the touch stone of the factual and legal position concluded as under: i. That the doctrine is not to operate where a promise has been made against a statute. 4. The learned single Judge having examined the grievances of the appellant/ writ petitioner, as projected in the writ petition, on the touch stone of the factual and legal position concluded as under: i. That the doctrine is not to operate where a promise has been made against a statute. This not only means that there is no estoppel against a statute but even where a promise has been made and the same have been acted upon even there that can be withdrawn if the public interest requires such an action to be taken, ii. That in some cases this can be withdrawn by giving adequate opportunity to the concerned party so that it may if possible revert back to the original position. iii. That a benefit in the shape of incentive or exemption can be withdrawn if the public interest so requires. See kasinka Trading and anr v. Union of India & anr (1995) SCC 274". Which became the subject matter of challenge in this Letters Patent Appeal. 5. Undoubtedly, where the State makes a promise in the form of incentive scheme, which is made available for a specified period of time, when the industrial Units are set up on the basis of that scheme, denying of the promise or benefit held out by it, public interest requires that the State be held bound by the promise held by it in such a situation. But this does not preclude the state from withdrawing the benefit even during the period of this scheme. If public interest so requires, even in a case where the party has acted on a promise, if there is any supervening public interest; it requires that the benefit be withdrawn or the scheme be modified, that supervening public interest would prevail over any promissory estoppel. After examining number of authorities, the Apex court in the case of Kasinka Trading and Another versus Union of India, (1995) 1 SCC 274 held that when there was supervening public interest in withdrawing the promise held out, the Government cannot be stopped from withdrawing benefit held out under an existing scheme. In the case of Shrinjee Sales Corporation and Another Versus Union of India, (1997) 3 CC 398, the Apex Court again after examining various authorities held, if supervening public interest so demands, the benefit under any incentive-scheme can be withdrawn. In the case of Shrinjee Sales Corporation and Another Versus Union of India, (1997) 3 CC 398, the Apex Court again after examining various authorities held, if supervening public interest so demands, the benefit under any incentive-scheme can be withdrawn. The same view was reiterated again in Union of India and others Versus Godhawani Brothers and Another, (1997)11\SCC 173. Further, the withdrawal of exemption notification before the expiry of period of its operation by another notification issued by the Government (Under the same statutory provision) in public interest, was held to be valid. It may further be pointed out that exemption is not a right and that it is open to the State Government to withdraw in public interest. 6. The submission made by Mr. Dutta, learned counsel appearing for the appellant, that the exemption granted under the J&K General Sales Tax Act would also include automatically exemption under the Central Sales Tax is an argument, which cannot be accepted. The reason is obvious that in case of former, the Government exercised the statutory powers under Section 5 of the J&K General Sales Tax Act, 1962 (Act No. XX of 1962), whereas in case of latter, The statutory powers are exercised by the Government conferred by sub-section (5) of Section 8 of the Central Sales Act, 1956 (74 of 1956). SRO-119 dated 31-08-1984 relates to the withdrawal of the facility of exemption under Central Sales Tax Act, 1962 in the public interest after putting the product manufactured by the SSI Unit of the appellant on Negative List. The appellant- Unit, therefore, is not entitled to the benefit of intervening period under Central. Sales Tax, i.e., from 1-10-1982 to 31-03-1984, for the same having been withdrawn in public interest. 7. Mr. Dutta, however, could not show that the notification, validity of which is under challenge are repugnant to State™s Industrial Policy declared in Government Resolutions, as pleaded in the petition, so as to be held bad. Notification 119 withdrawing the benefit of exemption of Central Sales Tax under Section 8 (5) of the Act, has also been issued in public interest. This SRO only limited the benefit of exemption. Denying exemption under SRO-119 from payment of Central Sales Tax to the appellant after the Unit is put on Negative List in public interest, in the facts and circumstances of the case, in our view, is based on good reasons. This SRO only limited the benefit of exemption. Denying exemption under SRO-119 from payment of Central Sales Tax to the appellant after the Unit is put on Negative List in public interest, in the facts and circumstances of the case, in our view, is based on good reasons. It is for the Policy Makers / Government to consider to whom benefit of exemption is to be extended and to whom no such benefit is to be extended in public interest and for such purpose, classification would be perfectly valid. The State has greater latitude in Taxation matters and in particular, in the grant of Tax Holiday. Withdrawal of notification of exemption vide SRO-119 by the Government under Section 8 (5) of the Central Sales Act, 1956 is clear and explicit and none can be said to be oblivious to its existence. 8. In case State of Rajasthan and others Versus Bhatnagar Cement Co. (P) Ltd., (1999) 3 SCC 264, it is held that promissory estoppel has to be pleaded and established. It is only if these factual particulars are pleaded and that the other side has opportunity to answer the same. There is nothing in the petition which can be said to be supporting the bald assertion of promissory estoppel by the necessary factual particulars. Where on facts, was found, as in the instant case, object for which facility of exemption was given has failed or not achieved, even the doctrine of promissory estoppel could not preclude the Government from putting the goods produced by Units in Negative List and issue a notification withdrawing this facility of exemption. In such, circumstances, withdrawal of this facility in public interest during currency of exemption would be valid. Supervening public interest would always prevail over any promissory estoppel. 9. Bald pleadings cannot be made the foundation for invoking the doctrine of Promissory Estoppel, is the view expressed by Apex Court in Dr. Ashok Kumar Maheshwari Versus State of U.P. and another, (1998) 2 SCC 502. 10. Supervening public interest would always prevail over any promissory estoppel. 9. Bald pleadings cannot be made the foundation for invoking the doctrine of Promissory Estoppel, is the view expressed by Apex Court in Dr. Ashok Kumar Maheshwari Versus State of U.P. and another, (1998) 2 SCC 502. 10. Sales Tax exemption, therefore, granted to SSI units by notification issued in exercise of powers under Taxation Laws and such exemption subsequently withdrawn in public interest in exercise of same statutory powers when no particulars produced showing that industry was set up on the basis of promise/ assurance, principle of promissory estopple not applicable; view taken in Sales Tax Officer and Another Versus Shree Durga Oil Mills and Another, (1998) 1 SCC 572. If that be the position, promissory estoppel does not bind the Government, is the view taken by the Apex Court in the case state of H.P. Versusu Kundan Lal Ahuja and Another, (2000) 10 SCC 559. 11. That apart, there is nothing on record to show that the industrial unit was set up by the appellant on the basis of any promise or assurance having been given by the State that they would be continuously given exemption from payment of Sales Tax under the State Taxation Laws and Central Sales Tax Act as well. When certain goods have been placed in Negative List and benefit of exemption has been withdrawn, no exception cab be taken. The appellant cannot claim that exemption from payment of Sales Tax under the State Taxation Laws would entitle him to the exemption under the Central Sales Tax on inter-State sales as well. The plea put across by the appellants counsel that the industrial unit was established taking into consideration the declared public policy that exemption granted would be continuously for a time bound period specified therein, and that it would not be altered at any time, is neither, thus, indicated any where nor borne out. The appellant, therefore, cannot contend that it is entitled to get continued exemption. The benefit in the shape of incentive or exemption can be withdrawn in the interest of public, if the public interest so requires. 12. What is legitimately deducible from the consistent view of the Apex Court that the doctrine of estoppel does not operate where the promise has been made against the statute. The benefit in the shape of incentive or exemption can be withdrawn in the interest of public, if the public interest so requires. 12. What is legitimately deducible from the consistent view of the Apex Court that the doctrine of estoppel does not operate where the promise has been made against the statute. In other words, there is no estoppel against statute even if promise made is acted upon and even in that event, it can be withdrawn if the public interest requires such action to be taken. It is not disputed that exemption from payment of Sales Tax was granted to the appellant and this benefit continued with retrospective effect. But that does not mean that they become entitled to these exemptions and would be given to them continuously. Therefore, neither the doctrine of promissory estoppel not the theory of legitimate expectations is applicable and attracted to the facts of this case. This exemption was withdrawn in exercise of the same statutory powers by issuing another notification and no case was made out by the appellant that it was not in public interest, we are, therefore, clearly of the opinion that the view expressed by the learned Single Judge cannot be faulted and no cause has been shown and made out by the appellant to interfere on merit. 13. For what has been stated and discussed above, the appeal, in our view, does not possess any merit and is accordingly dismissed.