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2017 DIGILAW 250 (HP)

Him Alloys and Steels (P) Ltd. v. State of H. P.

2017-03-28

MANSOOR AHMAD MIR, TARLOK SINGH CHAUHAN

body2017
JUDGMENT : Tarlok Singh Chauhan, J. The petitioner after having been unsuccessful in claiming the benefit of deferment of tax before the authorities constituted under the H.P. VAT Act, 2005 (for short the ‘Act’), has filed this petition claiming therein the following substantive reliefs:- “(a) To declare Notification No. EXN-F(1) 2/2004 dated 30.03.2005 (Annexure P-11) illegal and invalid to the extent of its retrospectivity and applicability to the industrial units in the pipe line and had actually started commercial production subsequently. (b) Issue an appropriate writ, quashing orders and demand notice dated 06.06.2008 passed by Respondent No. 5 (Annexure P-1) whereby liability of Rs. 7,92,095/- for the year 2006-07 and Rs. 30,98,215/- for 2007-08 were raised and deferment incentive was declined and orders dated 21.04.2010 passed by Respondent No. 4 (Annexure P-2) sustaining orders dated 06.06.2008 and also sustained imposition of penalty and interest as per orders dated 28.06.2011 (Annexure P-3) passed by Respondent No. 2 whereby orders of lower authorities were sustained. (c) Issue of a writ of mandamus directing the respondents to grant benefits of deferment of tax under Notification No. EXNF(9) 2/99 iv dated 23.07.1999 (Annexure P-4) and not to recover the demands and to refund the amount if recovered. (d) To reschedule the period for benefits of deferred tax as five years period has already expired from the date of commercial production i.e. 23.07.2006. (e) To refund the amount recovered as tax, penalties and interest. Certain undisputed facts may be noticed. 2. On 23.7.1999, the respondents notified Second Scheme regarding the deferred payment of tax by the existing industrial units and new industrial units in the State of Himachal Pradesh. The scheme was captioned as Himachal Pradesh General Sales (Deferred payment of Tax) Second Scheme 1999. Mini Steel Plants induction/Arc/Submerged furnaces and/or rolling mills, at that time were entitled to the exemption and had not been included in the negative list. 3. Para 4 of the Notification dated 23.07.1999, reads as under: “4. Periodicity of deferment (1) The facility of making deferred payment of sales tax under the Act shall be admissible to eligible units only for a period of ninety six months (8 years) in industrially backward areas, sixty months (5 years) in industrially developing areas and for a period of ninety six months (8 years) to priority industrial units. Periodicity of deferment (1) The facility of making deferred payment of sales tax under the Act shall be admissible to eligible units only for a period of ninety six months (8 years) in industrially backward areas, sixty months (5 years) in industrially developing areas and for a period of ninety six months (8 years) to priority industrial units. (2) The period of deferment specified in sub para (1) shall be reckoned from the date of commencement of commercial production or the date of notification of this scheme whichever is later.” 4. The State Government on the expiry of the aforesaid notification further issued another notification on 30.03.2005 (Annexure P-11), whereby it granted the benefit of deferred payment of entire tax for a period of 5 years to units in ‘A’ category area and 8 years for units in ‘B’ category area. However, as per entry 22 of Annexure - 1, Mini Steel Plants induction/ Arc/ Submerged furnaces and/or rolling mills were placed in the negative list, thereby dis-entitling the manufacturer of the aforesaid goods for the deferred payment of tax. Admittedly, the petitioner is engaged in the business of installing furnaces, rolling steel mills and to manufacture SS/MS Ingot, billets and TOR SARIA which fall in the negative list. 5. However, the case of the petitioner is that it was granted provisional registration on 26.08.2004 when the Industrial Policy of 1999 was in vogue and iron & steel industrial units had not been included in the negative list. It was after the grant of provisional registration, the petitioner applied for an additional requirement of land measuring 9000 square meters and the same was cleared in February, 2005. Acting upon the Industrial Policy of 1999, coupled with the grant of provisional registration certificate, petitioner started the activities for setting up of new industrial unit. On 27.10.2004, petitioner entered into an agreement with Smt. Neelam Sharma, w/o Shri Jawahar Lal and others for purchase of land worth Rs. 55,59,085/- and paid an advance amount of Rs. 9,76,000/-. The sale deed was executed on 9.6.2006 for the aforesaid amount of Rs. 55,59,085/-. On 19.11.2004, the petitioner deposited Rs.18 lakhs with the Himachal Pradesh State Electricity Board in compliance of Demand Notice for issuing of Power Availability Certificate. 6. The petitioner on 10.11.2004 and 22.11.2004 made an advance payment of Rs. 10 lakhs to M/s Megatherm Electronics (P) Ltd. and Rs. 55,59,085/-. On 19.11.2004, the petitioner deposited Rs.18 lakhs with the Himachal Pradesh State Electricity Board in compliance of Demand Notice for issuing of Power Availability Certificate. 6. The petitioner on 10.11.2004 and 22.11.2004 made an advance payment of Rs. 10 lakhs to M/s Megatherm Electronics (P) Ltd. and Rs. 10 lakhs to M/s Roll Mill Industries Ltd., Noida, for purchase of plant and machinery. In Sum and substance, the petitioner would claim that having invested such huge amount that too when the unit had not been included in the negative list, it was entitled to deferred payment of tax on the basis of principle of promissory estoppel. 7. The respondents have filed the reply wherein it is stated that the unit of the petitioner is situated in industrial developing area and commenced production only w.e.f. 23.07.2006 and was thus not entitled to benefit of the Notification dated 23.07.1999 as the same was operative only for 5 years up to 23.07.2004, when the unit of the petitioner was not even born. 8. It is further averred that vide notification dated 30.03.2005, the condition of eligibility for availing facility for making deferred payment of sales tax have been enumerated in para 3, relevant portion whereof reads as under: “3. Conditions of eligibility – The facility of making deferred payment of sales tax under the Act shall be admissible to a new industrial unit, only if – (i) It has not been included in the tax free industrial zone; (ii) It has not been included in the negative list;” 9. On the basis of the aforesaid criteria, it is averred that since goods manufactured and sold by the petitioner have been placed in the negative list, therefore, he is not entitled to the facility of making deferred payment of tax. We have heard the learned counsel for the parties and have gone through the records of the case. 10. It is vehemently argued by Mr. G.R. Sethi, Advocate, duly assisted by Mr. Sandeep Chauhan, Advocate, that the principle of promissory estoppel is clearly applicable to the facts of the case, therefore, the decisions rendered by all the authorities under the Act are wrong, illegal and deserve to be quashed and set aside and the petitioner is entitled to the benefit of deferred payment of tax. 11. On the other hand, Mr. Sandeep Chauhan, Advocate, that the principle of promissory estoppel is clearly applicable to the facts of the case, therefore, the decisions rendered by all the authorities under the Act are wrong, illegal and deserve to be quashed and set aside and the petitioner is entitled to the benefit of deferred payment of tax. 11. On the other hand, Mr. Anup Rattan, learned Additional Advocate General, would vehemently argue that since the petitioner is not entitled to the benefit of deferred payment of tax under notification dated 23.07.1999, as during the validity of this period, petitioner had taken no steps to establish the unit and came into production only after 16 months of the issuance of the subsequent notification dated 30.03.2005. That apart, since the petitioner is admittedly, manufacturing the goods which fall in the negative list, therefore, it is not entitled for the benefit of deferred payment of tax. 12. The petitioner has relied upon the following authorities in support of his plea of principle of promissory estoppel:- 1. Lloyd Electric and Engineering Limited vs. State of Himachal Pradesh and others (2015) 52 PHT 83 (SC) (FB 2. Mahabir Vegetable Oils Pvt. Ltd. vs. State of Haryana and others (2009) 24 VST 99 (P&H) 3. M.R.F. Ltd. vs. Assistant Commissioner (Assessment), Sales Tax and others (2006) 148 STC 225 (SC) 4. Mahabir Vegetable Oils Pvt. Ltd. and Another vs. State of Haryana and others (2006) 145 STC 350 (SC) 5. State of Bihar and others vs. Suprabhat Steel Ltd. And others (1999) 112 STC 258 (SC) 6. State of Bihar and Another vs. Usha Martin Industries Ltd. (1987) 65 STC 430 (SC) 7. Motilal Padampat Sugar Mills Co. Ltd. vs. The State of Uttar Pradesh and others (1979) 44 STC 42 (SC). 13. Whereas, the respondents on the same principle have relied upon the latest judgment of Hon’ble Supreme Court Manuelsons Hotels Private Limited vs. State of Kerala and Others (2016) 6 SCC 766 . 14. Motilal Padampat Sugar Mills Co. Ltd. vs. The State of Uttar Pradesh and others (1979) 44 STC 42 (SC). 13. Whereas, the respondents on the same principle have relied upon the latest judgment of Hon’ble Supreme Court Manuelsons Hotels Private Limited vs. State of Kerala and Others (2016) 6 SCC 766 . 14. A careful perusal of the judgments relied upon by either side would reveal that the Hon’ble Supreme Court has expounded the doctrine of principle of promissory estoppel and held that it equally applies to the government in exercise of its sovereign, governmental, public or executive powers and no distinction can be made between exercise of a sovereign or governmental function and a trading or business activity of government, so far as doctrine of promissory estoppel is concerned. Where the government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promisee, acting in reliance on it, alters his position, the government would be held bound by the promise and the promise would be enforceable against the government at the instance of promise, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. It is not even necessary for the petitioner to show that it has suffered any detriment and it is enough that the petitioner relied upon the promise or representation held out, and altered its position relying upon such assurance. 15. However, the moot question is whether the principle of promissory estoppel is applicable to the facts of the instant case. 16. Admittedly, the notification dated 23.7.1999, remained in force fully for a period of 5 years, whereby the deferred payment of sales tax was available to the units relating to Mini Steel Plants induction/Arc/Submerged furnaces and/or rolling mills, only available up till 23.07.2004. After 23.7.2004, the notification ceased to exist and it is only vide notification dated 30.3.2005, that the scheme for making deferred payment of tax was extended to the ‘A’ & ‘B’ category areas, but as the unit of the petitioner was manufacturing SS/MS Ingot, billets and TOR SARIA, which admittedly fall in the negative list, the petitioner obviously was not entitled to the deferred payment of tax. 17. 17. Apart from above, it would be noticed that the unit of the petitioner was granted provisional registration only on 26.08.2004 and by that time admittedly the notification dated 23.7.1999 remained in force for a period of five years, has already elapsed on 23.7.2004, therefore, in absence of any notification extending the benefit of deferred payment of tax, the petitioner cannot claim that while setting up industrial unit acted upon the promise held out by the respondents, that it would be entitled to the facilities of deferred payment of tax. 18. To the contrary, the notification dated 30.3.2005, which superseded the notification dated 23.07.1999, though did extend the benefit of deferred payment of tax but the petitioner could not be extended the benefit under this notification, as it fell within the negative list, as specified in the notification dated 30.3.2005. 19. It has come on record that even the commercial production was commenced by the petitioner almost 16 months after issuance of the notification dated 30.3.2005. Thus, it is evidently clear that the petitioner was not even born during the currency of the notification dated 23.7.1999, which as observed earlier was valid only for five years up till 23.7.2004. 20. From the aforesaid discussion, it is abundantly clear that the petitioner had taken no steps whatsoever for setting up its industrial unit during the currency of the notification dated 23.7.1999, which remained operative up till 5 years i.e. 23.7.2004 and whatever steps were taken to set-up the industry including the registration with the Industry Department was taken after 23.07.2004 i.e. after the scheme has come to an end. All the other effective steps for setting up the industrial unit were taken by the petitioner when the notification dated 30.3.2005 had been issued. However, since the goods manufactured by the petitioner fell within the negative list, it was not entitled to the benefit of the Scheme. 21. Therefore, in the given facts of the case, the doctrine of promissory estoppel is clearly not attracted, as the unit of the petitioner admittedly falls within the negative list and it is therefore not entitled to the benefit of deferred payment of tax that too under the notification dated 23.7.1999. 22. 21. Therefore, in the given facts of the case, the doctrine of promissory estoppel is clearly not attracted, as the unit of the petitioner admittedly falls within the negative list and it is therefore not entitled to the benefit of deferred payment of tax that too under the notification dated 23.7.1999. 22. Adverting to the orders passed by the various authorities constituted under the Act, which have been impugned herein, it would be noticed that the claim of the petitioner has been rejected mainly on the ground that the steps for setting up of the unit had been initiated only after the notification dated 23.07.1999 had already lapsed. Further more, the unit of the petitioner had come into production much after issuance of notification dated 30.3.2005 wherein the goods being manufactured by it were placed in the negative list and this is precisely what we have also held hereinabove. 23. Thus, no fault can be found with the aforesaid orders. Consequently, there is no merit in this petition and the same is accordingly dismissed, so also the pending applications, leaving the parties to bear their own costs.