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2007 DIGILAW 1270 (RAJ)

Suncity Industries Ltd. v. State of Rajasthan

2007-07-06

GOPAL KRISHAN VYAS

body2007
Honble VYAS, J.–By this writ petition the petitioner company, which is duly registered under the Companies Act, 1956 and carrying on business of manufacture and sale of vegetable oil and de-oiled cakes, is challenging the impugned order/decision dated 13.03.2001 (Annex.-9) which is communicated to the petitioner vide Annex.-8 dated 17.05.2002. The petitioner has also prayed for quashing Annex.-4 passed by Deputy Director, Industries on 07.06.1997. (2). According to the facts narrated in the petition, the petitioner company was set up for manufacture of vegetable oils and applied for availing subsidy under the notification dated 05.09.1990, known as State Capital Investment Subsidy Scheme 1990. Upon application filed by the petitioner company, the State Level Committee constituted under the Subsidy Scheme held the petitioner company entitled for subsidy in its meeting held on 15.05.1996 and, in pursuance of that decision taken in the meeting of the committee, a sanction letter was issued in June 1990 by the Director, Industries, Jaipur whereby it was informed to the petitioner company that a sum of Rs.15,00,000/- has been sanctioned to the petitioner company. (3). It is contended in the communication dated 07.06.1996 it was clearly mentioned that the State Level Committee sanctioned subsidy of Rs.15,00,000/- on the eligible fixed capital investment to the tune of Rs.461.37 lakh. It is submitted that vide communication dated 13.12.1996 it was informed to the petitioner by the Director, Industries, Jaipur that the subsidy sanctioned to the company has been cancelled and the file has been closed for two reasons. First, the petitioner unit does not fall under the definition of diversification and, secondly, the total investment of the petitioner company was Rs.352.76 lakh which was only 41.36% of the total project cost of Rs.853 lakh. It was also informed to the petitioner company that in view of the notification dated 28.10.1995 issued by the State Government the total investment in the project should be more than 75% of the total project cost. The petitioner company made a representation through registered letter on 10.01.1997 requesting to review the case of the petitioner company. Thereafter, again a representation was made on 07.05.1997 to the Commissioner of Industries; but, at last, vide Annex.-4 dated 07.06.1997 the representation of the petitioner was rejected and it was informed that decision has already been communicated vide communication dated 13.12.1996. (4). Thereafter, again a representation was made on 07.05.1997 to the Commissioner of Industries; but, at last, vide Annex.-4 dated 07.06.1997 the representation of the petitioner was rejected and it was informed that decision has already been communicated vide communication dated 13.12.1996. (4). The petitioner company again approached the Director of Industries through representation dated 13.05.1999 in which it was prayed that as per the decision of the Tax Board the petitioner company is entitled and eligible for the subsidy under the head diversification and made a request for sanction of the subsidy. Yet another representation was made by the petitioner dated 27.09.1999 to the Dy. Director (Subsidy), Directorate of Industries, Jaipur and it was requested by the petitioner company that as per the condition attached in the sanction letter the unit shall lose entitlement to subsidy if it is established that it failed to commence commercial production on its diversification project prior to 31.03.1995 and the investment in diversification is less than 25% of the value of net fixed assets of the original plant. But, in the case of the petitioner company, the commercial production was commenced before 31.03.1995 and it had made more than 25% investment. The petitioner company also clarified the position regarding the actual investment on project upto 31.03.1995 and gave a comparative chart showing that the company had invested more than 75% of the total project cost and, accordingly, prayer was made in the representation that upon fulfillment of the condition, the petitioner company is entitled to avail the benefit of subsidy as per the provisions contained in Subsidy Scheme, 1990. (5). In another representation dated 19.12.1999, it was prayed by the company that the project cost is of Rs.853 lakh and against which the company has spent a sum of Rs.729.22 lakh which is more than 75% of the project cost, therefore, the condition is satisfied even as per subsequent circular dated 28.10.1995, therefore, the petitioner unit was entitled to subsidy as per Subsidy Scheme of 1990. (6). Upon the aforesaid representation, the Directorate of Industries called the petitioner to attend the meeting of the State Level Committee for subsidy and to represent its case. On 13.03.2001, the petitioner appeared before the Committee and pleaded its case. (6). Upon the aforesaid representation, the Directorate of Industries called the petitioner to attend the meeting of the State Level Committee for subsidy and to represent its case. On 13.03.2001, the petitioner appeared before the Committee and pleaded its case. According to the petitioner, it explained before the Committee that subsidy has been sanctioned by the State Level Committee in its meeting dated 15.05.1996 and initially the sanction letter was issued on 07.06.1996 and the company was fulfilling all the conditions for the grant of subsidy but on illegal ground the subsidy already sanctioned to the petitioner by the State Level Committee has been cancelled. The petitioner company is challenging the decision given by the respondents on 13.03.2001 which is communicated to the petitioner on 17.05.2002 while submitting that the impugned action on the part of the respondents in rejecting the case of the petitioner on the basis of circular dated 28.10.1995 is ex facie illegal and contrary to the Subsidy Scheme of 1990. (7). It is contended by learned counsel for the petitioner that the petitioner company is very much entitled to the benefit of subsidy in accordance with the Scheme but the sanction initially granted in favour of the petitioner by the State Level Committee was illegally cancelled and the cancellation order was passed without issuing any notice or affording any opportunity of hearing to the petitioner. It is argued that availing the benefit of subsidy is a civil right conferred by the Statute and review is permissible only if the statute provides for such a review and, in absence of any express provision for review, the impugned decision for cancelling the sanction order of subsidy is illegal. Learned counsel for the petitioner submits that the petitioner unit has spent more than 75% of the project cost by 31.03.1997 as per the details submitted before the respondents and even according to the subsequent circular dated 28.10.1995 the petitioner is entitled to avail the benefit of subsidy under the Subsidy Scheme 1990. (8). It is also submitted by learned counsel for the petitioner that the impugned decision of the State Level Committee is based upon the circular dated 28.10.1995 issued by the Industries Department and upon perusal of the communication dated 13.12.1996 it is revealed that the earlier decision dated 15.05.1996 was turned down and the application for subsidy has been rejected while relying upon the circular dated 28.10.1995. The petitioner submits that the circular cannot over-ride the express provisions of the Scheme and is in the nature of administrative circular having no statutory force. According to learned counsel for the petitioner, the Scheme duly published in the official gazette does not lay down any such condition that by the end of the Subsidy Scheme or upto 31.03.1995 the unit is required to spend 75% of the total project cost, therefore, the impugned decision of respondent No.2 clearly hinges on the circular dated 28.10.1995 which itself is illegal and ultra vires the Scheme of 1990. (9). On the other hand, by way of filing reply to the writ petition, the respondents fully supported the decision for cancellation of the subsidy to the petitioner on the ground that the petitioner company has failed to fulfill the conditions as required under the rules. It is specifically averred in the reply that as per circular dated 28.10.1995 (Annex.-10) it is clearly mentioned that if the eligible large/medium scale industrial units in the case of expansion/diversification have invested 75% amount of the total investment of expansion/diversification of the project and started commercial production before 31.03.1995 they are entitled for State Capital Investment subsidy as per clause 5 of the Scheme. According to the respondents, the order dated 28.10.1995 is clarification regarding grant of State subsidy to the large/medium units in case of expansion/diversification, therefore, the Government is within its competence to pass clarification order with regard to grant of the benefit under a welfare scheme and, therefore, it cannot be said that the cancellation order is in contravention of the Scheme of 1990. Admittedly, this clarification was issued on 28.10.1995 and sanction order was issued on 07.06.1996, therefore, the said clarification was in existence prior to passing the sanction letter and the decision taken by the respondents on the basis of clarification for fulfillment of the condition is correct in its totality and cannot be questioned by the petitioner nor can it be said that the circular is contrary to the Scheme of 1990 because it is specifically provided as per clause 12 of the Scheme in which it is clearly mentioned that how the subsidy will be sanctioned. (10). (10). Learned counsel for the respondents also invited my attention towards clause 14(c) in which it is provided that the industrial unit availing of subsidy under this scheme will follow and maintain any other condition laid down by this scheme or by the procedure instructions, clarifications or amendments issued under this scheme. Therefore, the issuance of clarification dated 28.10.1995 cannot be questioned by the petitioner. (11). It is contended by learned counsel for the respondents that the petitioner company itself accepted in its representation dated 19.03.2001 (Annex.-7) that, ^^oSls Hkh cSBd ds nkSjku vkids }kjk Lohdkj fd;s x;s vk/kkj ij fofu;kstu 73-25 izfrkr rks gks gh jgk gS tks fd iqjkus lD;wZyj ds yxHkx gh gSA vr% vkS|ksfxd mRFkku ds en~nsutj bu rduhfd;ka NksVs eqn~nksa ij vM+pus iSnk djuk jkT; ljdkj dh Hkkouk ds foijhr gSA meaning thereby, according to the petitioner itself, there was less than 75% investment, therefore, the petitioner cannot claim subsidy as a matter of right. Similarly while inviting attention towards the contention of the petitioner in the representation, it is submitted that as per the petitioner company itself diversification was undertaken but it was not according to the provisions of the Scheme because 75% investment has to be undertaken by the company but the petitioner company did not fulfill the said condition, therefore, the sanction was rightly cancelled. It is submitted by the respondents that the said Scheme provides two important features under the Diversidification, (i) the unit should commence commercial production before 31.03.1995 and, (ii) the unit has to invest 75% of the approved project cost and these features were also part of the circular dated 28.10.1995. Thus the units which fulfill the aforesaid features could be eligible to get the benefit of the subsidy under the said Scheme failing which the company is ineligible for getting the benefit of subsidy under diversification. It is further submitted by learned counsel for the respondents that according to the Scheme the eligible fixed capital investment means investment in, - (1) actual price paid for the land to the extent needed, (2) new building to the extent needed, (3) new plant and machinery and other fixed capital investment essential for production by the unit and (4) technical know-how fees or drawing fees paid in lump sum to foreign collaboration or foreign supplies as approved by the Government of India. (12). (12). It is also submitted that the unit had taken "margin money for working capital" in its investment project submitted by the petitioner which does not conform to the schemes definition and, in these circumstances, the calculation of investment submitted by the petitioner is not acceptable for the reason that margin money for working capital is normally not included towards calculation of either project cost or EFCI and if the margin money is subtracted both from project cost as well as actual investment, then, investment comes to less than 75 per cent. In these circumstances, the decision of the department for cancellation of the subsidy to the petitioner is in accordance with law and does not require to be interfered with. It is further prayed while pointing out the contents mentioned in the additional affidavit filed by the District Industrial Officer on behalf of respondents, it is made clear that as per clause (14) of the notification, the petitioner was bound to continue the production for a period of five years but the petitioner failed to start the production as required for eligibility and further failed to continue the production for five years. It is also mentioned that the unit in question has already been sold by the petitioner by sale-deed dated 08.06.2004 which is filed with the additional affidavit. In these facts and circumstances, the respondents pray that no subsidy can be granted to the petitioner because the petitioner is no longer owner of the company and the writ petition deserves to be dismissed. (13). I have considered the rival submissions and perused the record. (14). First of all, in my opinion, the contention of the petitioner with regard to affording any opportunity of hearing before issuing cancellation order is not tenable because though earlier the decision of SLC for granting subsidy was cancelled by the Director, Industries vide order dated 13.12.1996; but, ultimately upon the representation filed by the petitioner company, the matter was finally decided by the State Level Committee, that too, after providing opportunity of hearing to the petitioner firm on 13.03.2001. Therefore, there is no substance in the argument of the petitioner that subsidy allowed to the petitioner was cancelled by the Director, Industries, Jaipur without affording opportunity of hearing. Therefore, there is no substance in the argument of the petitioner that subsidy allowed to the petitioner was cancelled by the Director, Industries, Jaipur without affording opportunity of hearing. It is also obvious from the record that in the event of breach of conditions it is always open to the sanctioning authority to cancel the benefit extended to the petitioner firm with regard to the subsidy. Therefore, the first contention of the petitioner that there is no provision for recalling the order of sanction without providing opportunity of hearing is rejected. (15). In this case it is not disputed before this Court that under the Subsidy Scheme 1990 eligible industrial units may be granted subsidy in accordance with the provisions of the Scheme and both the parties are bound with the terms and conditions of the Scheme. Upon perusal of Clause 14 (c), it is clear that the industrial unit claiming subsidy required to follow and maintain any other condition as well that may be laid down by the Scheme or by the procedure instructions, clarifications or amendments issued under the Scheme. Therefore, the first limb of the argument of the petitioner that Annex.-10 clarification is contrary to the Scheme or ultra vires is not sustainable because clarification Annex.-10 is issued under the provisions of the Scheme itself and is part and parcel of the scheme. (16). According to the petitioner, the company invested 75 per cent of the project cost of Rs.853 lakh and, for that purpose, the chart submitted by the petitioner company is required to be considered which reads as under : As perprospectus As perBalance sheet Building & Civil works 80 Plant & machinery 332 352.76 Installation & Commissioning 26 Misc. (16). According to the petitioner, the company invested 75 per cent of the project cost of Rs.853 lakh and, for that purpose, the chart submitted by the petitioner company is required to be considered which reads as under : As perprospectus As perBalance sheet Building & Civil works 80 Plant & machinery 332 352.76 Installation & Commissioning 26 Misc. Fixed assets 77 Pre-operative Expenses 66 Contingencies 52 51.42 Prepayment of RFC 21 21 Margin Money for Working capital 199 304.04 853 729.22 The Department, after considering this chart in the impugned order Annex.-9, dealt with the contention of the petitioner company and refused to accept the position of investment shown by the petitioner holding that the calculation so submitted by the petitioner company is not acceptable on the ground that margin money for working capital is not normally included towards either project-cost or EFCI, therefore, the respondents while subtracting margin money both from the project cost as well as from the actual investment, arrived at the following position with regard to capital investment : As per Projed As on 31.3.95 853 729.22 (-) 199.00 (-) 304.04 654 (75% = 490.5) 425.18 (=65.01%) (17). While applying the aforesaid method, it is held that the petitioner is not entitled to subsidy because its investment is less than 75%. In my opinion, it is true that total cost of project was Rs.853 lakh and according to the project it is not disputed thated Rs.199 lakh was shown margin money out of Rs.853 lakh, therefore, the actual project cost was Rs.654 lakh excluding Rs.199 lakh margin money. According to the petitioner, the petitioner invested Rs.729.22 lakh out of which Rs.304.04 lakh was margin money. In my considered opinion, the calculation cannot be accepted. Even if the petitioners contention is accepted that in the project cost the margin money mentioned in the project is required to be calculated for the whole project, then also, the said margin money is Rs.199 lakh. Admittedly in this case, the petitioner has claimed that he invested Rs.729.22 lakh in total, out of which Rs.304.04 lakh is margin money. It is strange that margin money was originally mentioned Rs.199 lakh, therefore, Rs.199 lakh margin money only can be calculated and, even after the petitioners contention is accepted, it comes to 624.18 lakh which is 73.18% of the total project of Rs.853 lakh. It is strange that margin money was originally mentioned Rs.199 lakh, therefore, Rs.199 lakh margin money only can be calculated and, even after the petitioners contention is accepted, it comes to 624.18 lakh which is 73.18% of the total project of Rs.853 lakh. The respondents in the impugned order rightly considered this aspect of the matter, therefore, I see no reason to interfere with the order under challenge. Having considered the entire matter in its totality, I am in full agreement with the respondents that the petitioner cannot claim any right at this stage because admittedly he has sold the unit on 08.06.2004 and he is not the owner of the unit and as such according to clause 14 of the Scheme of 1990 he himself is not continuing the production, therefore, he cannot claim subsidy which is in the nature of incentive for the industrial growth. (18). It is also required to be said that for industrial development the State Government has decided to grant subsidy for supporting the industrial units and for achieving this goal the Government has framed the Scheme. In this case, the petitioner is insisting upon the claim for subsidy knowing it well that the said unit was sold in 2004 itself; meaning thereby, the claim staked by the petitioner for subsidy is also in question. It was the duty of the petitioner to inform this Court that the unit has already been sold but this fact has been brought to the notice by way of filing additional affidavit on 11.02.2005 by the respondent. Before that it was well within the knowledge of the petitioner that at present he is no longer the owner of the firm, yet the writ petition for the relief of granting subsidy is being pursued by the petitioner. I have also perused the sale-deed which is filed alongwith the affidavit in which it is nowhere mentioned that the matter with regard to grant of subsidy is pending in the High Court. Thus an attempt has been made by the petitioner to obtain subsidy amount without disclosing this fact to the purchaser of the company. As noted above, the petitioner did not disclose before this Court that the unit has been sold out. Therefore, the conduct of the petitioner is also censurable. (19). Thus an attempt has been made by the petitioner to obtain subsidy amount without disclosing this fact to the purchaser of the company. As noted above, the petitioner did not disclose before this Court that the unit has been sold out. Therefore, the conduct of the petitioner is also censurable. (19). In the result, the writ petition is dismissed with cost of Rs.5,000/- to be deposited by the petitioner with the Legal Aid Board, Jodhpur within a period of three months from today.