Gauhati High Court
WP(C)/1834/2021 on 29 April, 2025
Author: Soumitra Saikia
Bench: Soumitra Saikia
GAHC010048892021
IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
W.P(C) NO. 2068/2021
M/S Lalit Poly Weave LLP
A Limited Liability Partnership firm registered under
the Limited Liability Partnership Act, 2008 and having
its registered office at Industrial Growth Centre,
Phase-III, Jambari Village No.2, Kamrup, Assam-
781124 and in the present proceedings represented by
Shri Mahabir Prasad Jain, authorized signatory of the
partnership firm.
........Petitioner
-Versus-
1. The State of Assam
Represented by the Chief Secretary to the Govt. of
Assam, Assam Secretariat, Dispur, Guwahati-06
2. The Commissioner & Secretary
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
3. The Additional Chief Secretary
Page 1 of 114
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
4. The Finance Secretary to the Govt. of Assam
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
5. The Commissioner of State Taxes, Assam,
Kar Bhawan, Dispur
........Respondents
W.P(C) NO. 1834/2021
M/S Eco Tech Papers
A partnership firm having its registered office at
2nd Floor, Subham Velocity, Opp Wallford, Honu
Ram Boro Path, GS Road, Guwahati-781005 and
its factory at village.Kamalpur & Dolma,
P.O.-Kamalpur, Mouza-Pubpar, in the District of
Kamrup(R) and in the present proceedings represented
by Rahul Lohia, one of the partners of the petitioner
firm.
........Petitioner
-Versus-
1 The State of Assam
Represented by the Chief Secretary to the Govt. of
Assam, Assam Secretariat, Dispur, Guwahati-06
2. The Commissioner & Secretary
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
3. The Additional Chief Secretary
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
Page 2 of 114
4. The Commissioner of State Taxes, Assam,
Kar Bhawan, Dispur
........Respondents
W.P(C) NO. 2500/2021
M/s Ramdhenu Packaging Solutions
A partnership firm registered under the Indian
Partnership Act, 1932 and having its registered office
and factory at KB Road Rowriah, (Sensowa Gaon,
Borbheta), Jorhat and in the present proceedings
represented by Sri Venus Agarwalla, one of the
partners of the petitioner firm.
........Petitioner
-Versus-
6. The State of Assam
Represented by the Chief Secretary to the Govt. of
Assam, Assam Secretariat, Dispur, Guwahati-06
7. The Commissioner & Secretary
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
8. The Additional Chief Secretary
to the Govt. of Assam,
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
9. The Deputy Secretary to the Govt. of Assam
Finance & Taxation Department, Assam Secretariat,
Dispur, Guwahati-781006
10. The Commissioner of State Taxes, Assam,
Kar Bhawan, Dispur
........Respondents
Page 3 of 114
-BEFORE-
HON'BLE MR. JUSTICE SOUMITRA SAIKIA
Advocate for the petitioners : Dr. AK Saraf, Senior Advocate
Mr. PK Bora, Advocate
Advocate for the respondents : Mr. Devajit Saikia, Advocate General, Assam
Mr. B Choudhury, Standing Counsel,
Finance & Taxation Department
Date of Hearing : 28.01.2025
Date of Judgment and Order : 29.04.2025
JUDGMENT AND ORDER (CAV)
Heard Dr. AK Saraf, learned Senior Counsel assisted by Mr. PK
Bora, learned counsel for the petitioners. Also heard Mr. B.
Chowdhury, learned Standing Counsel, Finance and Taxation
Department.
2. These 3 (three) writ petitions have been filed by the petitioners
who established their manufacturing units pursuant to the incentives
offered in the Industrial Policy of Assam 2008 and the Assam
Industries (Tax Exemption) Scheme, 2009. All these petitioners have
set up their industrial and manufacturing units for manufacturing
their respective items believing that the petitioners would be able to
avail the VAT exemption for a period of 7 (seven) years from the
date of commencement of commercial production. In WP(C) No.
2068/2021 the petitioner, namely, M/s Lalit Poly Weave LLP is a
limited liability partnership firm having its registered office and
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factory at the Industrial Growth Centre, Phase-III, Jambari Village
No.2, Kamrup, Assam 781124. The petitioner is engaged in the
manufacture of PP Woven Bags and sacks. The petitioner in WP(C)
No. 2068/2021 is represented by Sri Mahabir Prasad Jain, authorized
signatory of the petitioner firm. The petitioner made total investment
of Rs.14,33,77,608/- in its industrial unit for land, site development,
building, electrical equipments etc. Commercial production in the
new industrial unit commenced on 21.09.2013. In order to avail the
benefits of VAT remission under the Industrial Policy of Assam , 2008
and the Assam Industries (Tax Exemption) Scheme, 2009 applied for
issuance of eligibility certificate bearing no.AIDC/US/EC/623/10/53
dated 04.11.2015. By the said eligibility certificate the petitioner was
hold to be entitled to the benefit of exemption under the Assam
Industries (Tax Exemption) Scheme, 2009 for a period of 7 years
with effect from 21.09.2013 to 20.09.2020 subject to maximum of
100% of the eligible fixed capital investment of unit of
Rs.11,83,54,569/-. The said petitioner was accordingly issued the
certificate of entitlement bearing No. CTS-21/2016/(356)/101 dated
20.07.2016 holding the petitioner to be entitled to exemption of tax
to the extent of Rs.11,83,54,569/- within the period from 21.09.2013
to 20.09.2020.
Page 5 of 114
3. In WP(C) No.1834/2021 the petitioner, namely, M/s Eco Tech
Papers is a partnership firm having its registered office at 2 nd Floor,
Subham Velocity, Opp Walford, Honu Ram Boro Path, G.S. Raod,
Guwahati-781005 and its factory at Viilage- Kamalpur & Dolma. The
petitioner is engaged in the business of manufacture of Kraft paper.
The petitioner in WP(C) No.1834/2021 is represented by one Sri
Rahul Lohia. The petitioner made total investment of
Rs.102,22,37,180/- in its industrial unit for land, site development,
building and other civil construction work etc. Commercial production
in the new industrial unit commenced on 26.02.2014. In order to
avail the benefits of VAT remission under the Industrial Policy of
Assam, 2008 and the Assam Industries (Tax Exemption) Scheme,
2009 applied for issuance of eligibility certificate bearing
no.AIDC/US/EC/623/10/20243 dated 26.09.2018. By the said
eligibility certificate the petitioner was hold to be entitled to the
benefit of exemption under the Assam Industries (Tax Exemption)
Scheme, 2009 for a period of 7 years with effect from 26.02.2014 to
25.02.2021 subject to maximum of 100% of the eligible fixed capital
investment of unit of Rs.59,15,16,915/-. The said petitioner was
accordingly issued the certificate of entitlement dated 14.11.2018
holding the petitioner to be entitled to exemption of tax to the extent
Page 6 of 114
of Rs.59,15,16,915/- within the period from 26.02.2014 to
25.02.2021.
4. The petitioner in WP(C) No.2500/2021, namely, M/s Ramdhenu
Packaging Solutions is a partnership firm having its registered office
and factory at KB Road, Rowriah (Sensowa Gaon, Borbheta), Jorhat.
The petitioner is engaged in the business of manufacture of non-
woven fabric bag, paper cub, hide fabric bag. The petitioner in
WP(C) No.2500/2021 is represented by Sri Venus Agarwalla. The
petitioner made total investment of Rs.1,47,10,497/- in its industrial
unit for land, site development, building and other civil construction
work etc. Commercial production in the new industrial unit
commenced on 25.02.2013. In order to avail the benefits of VAT
remission under the Industrial Policy of Assam, 2008 and the Assam
Industries (Tax Exemption) Scheme, 2009 applied for issuance of
eligibility certificate bearing no.CI&C(II)(US)EC/223/2013/349/46
dated 11.08.2014. By the said certificate the petitioner was held to
be entitled to the benefit of exemption of Tax under the Assam
Industries (Tax Exemption) Scheme, 2009 to the tune of
Rs.1,47,10,497/- for a period of 7 seven years with effect from
25.03.2013 to 24.02.2020 or at the rate of 150% of the eligible fixed
capital investment of Rs.98,06,998/- whichever is earlier. The
petitioner was thereafter issued the certificate of entitlement dated
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09.01.2015 holding the petitioner to be entitled to be exemption of
tax to the extent of Rs.1,47,10,497/-. The said certificate was shown
to be valid from 25.02.2013 to 24.02.2020.
5. All these three writ petitioners are assailing the legality and
validity of the Assam Industries (Tax Reimbursement for Eligible
Units) (Amendment) Scheme, 2020 framed by notification no.
FTX113/2017/186 dated 30.12.2020 issued by the Commissioner and
Secretary to the Government of Assam Finance (Taxation)
Department amending the Assam Industries (Tax Reimbursement for
Eligible Units) Scheme, 2017 with immediate effect withdrawing the
powers of the Finance (Taxation) Department to extent the time limit
for the period of eligibility by a further period not exceeding 5 years
in respect of the existing eligible units availing the benefits of
exemption under Industrial and Investment Policy of Assam, 2008. In
respect of those units or industries who were unable to utilize or
avail the full amount of monitory ceiling within the specified period of
exemption. Such action of the State respondents are being alleged to
be arbitrary, illegal and violative of Article 14 of the Constitution of
India.
6. All these three writ petitions make similar challenges and raise
similar questions and therefore, taken up together for hearing.
Page 8 of 114
7. Dr. AK Saraf, learned Senior Counsel assisted by Mr. PK Bora,
leaned counsel for the petitioners submits that the petitioners are
aggrieved as they have been deprived from availing or utilizing the
full amount of monitory ceiling within the specified period of
exemption and such action on the part of the respondents restraining
the petitioners from availing the benefits are absolute arbitrary,
illegal and violative of Article 14 of the Constitution of India. It is
submitted that the petitioners were inspired to set up their industries
in their respective locations for manufacturing of the finished
products in view of the promises made and the incentives offered
under the Industrial Policy of Assam, 2008 and the Assam Industries
(Tax Exemption) Scheme, 2009. It is submitted that in order to give
effect to the various incentives announced under the Industrial Policy
of Assam, 2008, the Government of Assam framed a scheme,
namely, the Assam Industries (Tax Exemption) Scheme, 2009 in
exercise of powers under Section 54 (1) of the Assam Value Added
Tax Act, 2003 and Section 8 (5) of the Central Sales Tax Act for
granting exemption partially to such units which manufactures goods
in Assam. The said scheme came into force with effect from
01.10.2008. In the said scheme it was mentioned that the benefits
given under the scheme shall be available till the Assam VAT Act,
2003 remains in force. It is also stated that the said scheme shall be
Page 9 of 114
applicable to the units which manufactures goods in Assam which are
considered eligible for partial tax exemption with reference to the
Industrial Policy of Assam, 2008. It is submitted that as per the
Scheme of 2009, the new industrial units of medium and large
section was to be entitled to exemption of tax on sales of finished
products for a period of 7 (seven) years subject to maximum of
100% of fixed capital investment. The procedure for grant of
eligibility certificate was provided for in Clause 4 of the Scheme and
Clause 5 provided for the issue of certificate of entitlement.
Accordingly, the writ petitioners made the investment of
Rs.11,83,54,569/-, Rs.59,15,16,915/- and Rs.1,47,10,497/-
respectively for setting up its land, site development, buildings,
electoral equipments, commercial production in respect of the writ
petitioners commenced with effect from 21.09.2013 to 20.09.2020,
26.02.2014 to 25.02.2021 and 25.03.2013 to 24.02.2020
respectively. The eligibility certificate dated 04.11.2015, dated
26.09.2018 and 09.01.2015 respectively were also issued by the
appropriate authority certifying that the petitioners have been held to
be entitled to the benefit of exemption under the Scheme of 2009 for
a period of 7 years subject to the maximum of 100% of the eligible
capital investment of the unit. It is therefore submitted that as per
the Industrial Policy of Assam, 2008 read with the Scheme of 2009,
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the Industries eligible for remission of VAT under the Assam VAT Act,
2003 and the central sales tax payable under the Central Sales Tax
Act, 1956 are entitled for the benefit for a period of 7 years subject
to the maximum of 100% of the fixed capital investment and
accordingly, all the petitioners were availing the benefits of tax
remission as promised under the Industrial Policy of Assam, 2008
and the Scheme of 2009. However, with effect from 01.07.2017 the
Goods and Service Tax regime was introduced all the over the
country and the Central Goods and Service Tax Act, 2017 was
enacted whereby apart from the other central tax laws, central excise
was also subsumed in the Central Goods and Service Tax. Similarly,
the State Goods and Service Tax Act, 2017 was introduced along
with the Integrated Goods and Service Tax Act, 2017. The writ
petitioner in WP(C) No.2068/2021 was issued the certificate under
the registration GST Act on 26.09.2017. In WP(C) No.1834/2021, the
petitioner had applied and was issued certificate on 31.01.2020 and
in WP(C) No. 2500/2021 the writ petitioner had applied and was
issued the certificate under the registration GST Act on 19.09.2017.
It is submitted that the Government of Assam vide the notification
no. FTX.90/2016/71 and notification no.FTX.90/2016/70 both dated
29.06.2017 notified that the Assam Industries (Tax Exemption)
Scheme, 2009 and the Assam Industries (Tax Exemption) Scheme,
Page 11 of 114
2015 shall cease to operate on and from the date of coming into
force of the Assam Goods and Services Tax Act, 2017 and all eligible
units availing tax exemption under the said earlier schemes shall be
liable to pay tax under the Assam Goods and Service Tax Act from
the date of coming into force of the said Act on the ground that the
existing system of tax exemption was not compatible under the GST
Regime. Accordingly, all eligible units availing tax exemption under
the said earlier schemes became liable to pay tax under the Assam
Goods & Services Tax Act, 2017 from the date of coming into force
of the said Act.
8. It is submitted that the Government of Assam thereafter
brought out another scheme, namely, Assam Industries (Tax
reimbursement for Eligible Units) Scheme, 2017 for granting
reimbursement of tax to eligible units under the Industrial and
Investment Policy of Assam, 2008 and/or under the Industrial and
Investment Policy of Assam, 2014 or those which were covered by
earlier Schemes or special notifications. The scope and operation of
the scheme is prescribed under the Clause -3 of the said scheme. It
is submitted that the Clause -4 of the Scheme provided for
determination of amount reimbursable. The proviso to Clause 4 (1)(i)
of the Scheme of 2017 provided for that if any existing eligible unit
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including a mega unit to which the customized tax incentives have
been granted, is unable to utilize or avail of the full amount of
monetary ceiling within the specified period of exemption, it may
make an application to the Finance (Taxation) Department for
extension of period of eligibility and upon examination of such an
application, if the Finance (Taxation) Department is satisfied that the
unit could not achieve the full quantum of monetary ceiling due to
some genuine reasons and in other to sustain the industrial unit, it is
necessary to extend such time limit, it may, by an order, extend such
time limit by a further period not exceeding five years. It is submitted
that although by the Scheme of 2017 the Finance (Taxation)
Department of Government of Assam had extended the time limit for
further period by not exceeding for 5 years in respect of existing
eligible units availing the benefits under the Industrial and
Investment Policy of Assam, 2008 were unable to utilize or avail the
full amount of monetary ceiling within the specified period of
exemption, but the same was made limited only in respect of tax
accruing in tax of the State Government under the Assam Goods and
Services Tax Act, 2017 and thereby the eligible units could not have
availed the full benefits as promised under the Policy of 2008 and the
Scheme of 2009 within a period of 7 years from the date of
commercial production.
Page 13 of 114
9. Learned senior counsel for the petitioners submits that when
the Government of Assam announced the new Industrial &
Investment Policy of Assam, 2014 and framed the Assam Industries
(Tax Exemption) Scheme, 2015, the State Government was
conscious of the fact that GST was going to be introduced very soon
and the same was in the final stage of implementation and thereby
provided for that the benefit under the Policy of 2014 and Scheme of
2015 may be availed for a period of 15 years from the date of
commencement of commercial production subject to the monetary
ceiling provided under the said Policy and Scheme. It is further
submitted that Although in respect of the industrial unit established
under the Industrial Policy of 2014 wherein a period of 15 years was
provided to avail the benefit of exemption but in respect of the said
units also the proviso to Clause 4(1)(ii) empowered the Finance
(Taxation) Department to extend the time limit by a further period
not exceeding five (5) years in case the said units could not avail the
full quantum of monetary ceiling due to some genuine reasons.
10. Learned senior counsel submits that since the petitioners could
not avail the entire benefit due to the introduction of the GST
regime, an application dated 18.08.2020 was addressed to the
Finance Secretary, Finance (Taxation) Department requesting for
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extension of the period of exemption under the Policy of 2008 and
the Scheme of 2009. In the said letter the petitioner firm requested
for extension of the period of validity of the Certificate of Entitlement
as the petitioner firm could only utilize less than half of the
entitlement amount. In the said letter, the Petitioner stated that the
entire amount for which the Petitioner was entitled to exemption
could not be utilized by the industrial unit of the Petitioner inasmuch
as the industrial product of the Petitioner Firm attracted low margin
and value addition and as a result output tax generation over the
input tax credit was also very low. It was further stated that VAT rate
was just 5%/ 6% during VAT Regime and Central Sales Tax 2%
against C Form and thus output tax generation was also very low. So
only very little could be utilized by the petitioner firm and that since
GST inception prices became very much competitive and SGST
portion payable by the petitioner firm stayed on a lower side. In
support of the prayer for extension of the period of eligibility, the
Petitioner stated that PP Granule was the main raw material
component which was directly related to crude oil prices in the
international market and it keeps on changing with the change in
crude oil prices and in turn sales prices of the petitioner's products
change in the same way as PP Granule prices. The prices are
extremely volatile and have stayed low for a reasonable period of
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time, which affected the Sales prices too and thus keeping lower
value of value addition and tax payable and that amidst of worldwide
COVID 19 pandemic crisis situation where no business houses could
escape itself the petitioner firm also witnessed a huge decline on its
sales. The Petitioner further stated that because of competitive
market situation and introduction of new PP Bags plant in and
around Guwahati area, turnover declined in last financial years. The
Petitioner, therefore, in the need for survival of its industrial unit in
the long run, vide the aforesaid letter prayed for an extension of the
validity of the Certificate of Entitlement. The said letter was duly
received by the Office of the respondent. However, the said
application remained pending and no order whatsoever was passed
on the application submitted by the petitioner for extension of the
period of exemption. It is submitted that number of similarly situated
industrial units whose eligibility period had expired, applied for
extension of the period of eligibility and were also granted such
extension by the Finance (Taxation) Department for a further period
of 5 years. It is submitted that Similar representation were also
addressed by the petitioner in and those representations were also
kept pending. It is submitted that the said Scheme of 2017 was
subsequently amended by the Amendment Scheme of 2020 with
effect from 30.12.2020. By the said amendment, the proviso to
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Clause 4(1)(i) which empowered the Finance (Taxation) Department
to extend the period of eligibility in respect of an existing eligible unit
who were unable to utilize or avail the full benefit of the period of
exemption for genuine reasons by a further period of not exceeding
5 years was withdrawn. By the said amendment of the scheme of
2017 by a saving clause, it has been provided for that all orders
issued by the Finance (Taxation) Department for extension of period
of eligibility shall be deemed to have been validly issued as if the
Scheme had not been amended and all pending applications on
which order for extension of period of eligibility had not been passed
shall be deemed to have been rejected and thereby making a
discrimination between the eligible industrial units in respect of which
the orders of extension have already been passed prior to
amendment of the said Scheme of 2017 by the Scheme of 2020 and
in respect of eligible industrial units whose applications were left
pending.
11. Learned senior counsel for the petitioners highlighted that
even before the amendment Scheme of 2020, cases of similarly
situated industrial units who could not avail the benefit for the entire
period were duly considered and extension was granted for the
period of 5 years from the date on which the period of 7 years
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eligibility had expired. Learned senior counsel for the petitioner
submits that The denial of benefit of exemption by not extending the
period of eligibility for a further period not exceeding 5 years as
provided for in the Scheme of 2017 by the Amendment Scheme of
2020 and making a discrimination between eligible industrial units in
respect of which the orders of extension have already been passed
prior to amendment of the said Scheme of 2017 by the Scheme of
2020 and in respect of eligible industrial units whose applications
were left pending and no orders were passed on the said
applications, is not only in violation of the doctrine of promissory
estoppel and legitimate expectation but the same also does not fulfill
the mandate of Article 14 of the Constitution of India of a reasonable
classification. The impugned amendment is in violation of the
doctrine of promissory estoppel and the classification made between
eligible industrial units in respect of which the orders of extension
have already been passed prior to amendment and in respect of
eligible industrial units whose applications were left pending and no
orders were passed on the said applications has no reasonable nexus
with the object sought to be achieved by the Scheme of 2017. He
further submits that The petitioner established its industrial unit
being inspired and encouraged by the incentives promised in the
Policy of 2008 read with the Scheme of 2009 wherein it was
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promised that the benefit of exemption shall be granted by way of
remission of VAT payable under Assam VAT Act, 2003 and central
sales tax payable under Central Sales Tax Act, 1956 for a period of 7
years subject to the monetary ceiling fixed in the Policy and Scheme.
The eligibility period for availing the benefit, in case of the petitioner,
was to expire on 20.06.2019. However, with effect from 01.07.2017
the Goods and Service Tax regime was introduced and thereby the
earlier Scheme of 2009 was withdrawn by Notification
FTX.113/2017/72 dated 19.01.2018. However, since the State made
a clear promise in the Policy of 2008 read with the Scheme of 2009
to grant the benefit of remission of VAT payable under Assam VAT
Act, 2003 and central sales tax payable under Central Sales Tax Act,
1956 on establishment of new industrial unit in the State of Assam
and the said benefit was withdrawn in view of the enactment of the
Assam GST Act, 2017 inasmuch as the existing system of tax
exemption was not compatible with the GST regime and thereby a
new Scheme, namely Assam Industries (Tax Reimbursement for
Eligible Units) Scheme, 2017, was framed for granting
reimbursement of tax to eligible units. Since the promise made in the
Policy of 2008 as well as Scheme of 2009 was grant of exemption in
respect of VAT payable under Assam VAT Act, 2003 as well as central
sales tax payable under CST Act, 1956, and the said benefit was
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curtailed and made applicable only in respect of the tax accruing in
cash to the State Government under the Assam Goods & Service Tax
Act, 2017, and further because post GST the petitioner was getting
benefit of (IGST) paid on import of goods as input tax credit and
getting setoff of the IGST paid against CGST/SGST output liability
and thereby the liability to pay tax under SGST gradually reduced.
The State was aware that an eligible unit would not be able to avail
the said benefit of remission within a period of 7 years under the
Policy of 2008 and Scheme of 2009, in view of limiting the benefits
only in respect of the tax accruing in cash to the State Government
under the Assam Goods & Service Tax Act, 2017, the proviso to
clause 4 (1)(i) of the Scheme of 2017 provided for an extension of
the period of eligibility by a further period of 5 years which was in
tune with promises and assurance made in the Policy of 2008 and
Scheme of 2009 and thereby the withdrawal of the said power given
in the Scheme of 2017 for extending the period of eligibility to those
eligible units which could not utilize or avail the full amount of
monetary ceiling within the specified period of exemption amounts to
resilement of the promises made in the Policy of 2008 and the
Scheme of 2009 as well as the Scheme of 2017 and thereby the
same is in complete violation of the Doctrine of Promissory Estoppel.
It is further submitted that the Government of Assam made a specific
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promise by announcing the Policy of 2008 and the Scheme of 2009
and intending that it would be acted upon by the promisee and since
the Petitioners already acting upon the said promise altered its
position by making huge investment in setting up its industrial units,
the Government of Assam is bound by its promise and such promise
is enforceable against the Government. The doctrine of promissory
estoppel would be attracted in such case inasmuch as equity requires
that the State Government should be held bound by the promise
made by it and the said benefits promised in the Policy of 2008 and
Scheme of 2009 cannot be curtailed and/ or taken away by any
subsequent act of the State Government. The State Government
being fully aware of its position that it cannot resile from the
promises and assurances after enactment of the GST Act and with
the withdrawal of Scheme of 2009 by Notification dated 19.01.2018
framed the Scheme of 2017 to grant the benefits of exemption to
eligible units and further empowered the Finance (Taxation)
Department for extension of the period of eligibility in respect of
those industrial units which could not achieve the full quantum of
monetary ceiling due to some genuine reasons, the State
Government cannot be allowed to deny the benefit of extension of
the period of eligibility inasmuch as in the earlier period fixed for
eligibility, the benefit could not be availed due to introduction of the
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Assam Goods and Service Tax Act, 2017 and because the benefit was
made limited to the tax accruing in cash to the State Government
under the Assam Goods & Service Tax Act, 2017 and thereby the
respondents, on the basis of doctrine of Promissory Estoppel, are
duty bound to make good its promise to the petitioner who acted
upon the said promise altered its position to avail the benefits as
promised in the Policy of 2008 and Scheme of 2009 and thereby the
Scheme of 2020 by which the power for extension of the period of
eligibility has been withdrawn is hit by the doctrine of promissory
estoppel and thereby the said Scheme of 2020 is liable to be
declared as illegal and is further liable to be struck down.
12. Referring to the judgment of the Apex Court in Motilal
Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh reported in
(1979) 2 SCC 409. It is submitted that the Government is not exempt
from liability to carry out the representation made by it as to its
future 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. It is submitted that the
superstructure of the doctrine with its preconditions, strengths and
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limitations have been outlined by the Apex Court in this landmark
judgment of Motilal Padampat (supra). The Apex Court reiterated the
well known pre conditions for the operation of the Doctrine of
Promissory Estoppel as under:
(1) a clear and unequivocal promise knowing and intending
that it would be acted upon by the promisee;
(2) such acting upon the promise by the promisee so that it
would be inequitable to allow the promisor to go back on the
promise.
13. The Court further observed that that the doctrine was not
limited only to cases where there was some contractual relationship
or other pre-existing legal relationship between the parties. The
principle would be applied even when the promise is intended to
create legal relations or affect a legal relationship which would arise
in future. The Government was held to be equally susceptible to the
operation of the doctrine in whatever area or field the promise is
made -- contractual, administrative or statutory. It is submitted that
the limitation of the Doctrine of Promissory Estoppel has also been
clearly enunciated in the said judgment. It is submitted that the Apex
Court held that the Doctrine of Promissory Estoppel being an
equitable Doctrine it must yield when the equity so requires.But it is
only if the Court is satisfied, on proper and adequate material placed
by the Government, that overriding public interest requires that the
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Government should not be held bound by the promise but should be
free to act unfettered by it, that the Court would refuse to enforce
the promise against the Government. It is submitted that the Apex
Court had held that the person of the authority making a
presentation or promise must have the power to keep in the promise.
If the power is there, then subject to the preconditions and
limitations noted earlier, it must be exercised. Thus, if the statute
does not contain a provision enabling the Government to grant
exemption, it would not be possible to enforce the representation
against the Government, because the Government cannot be
compelled to act contrary to the statute. But if the statute confers
power on the Government to grant the exemption, the Government
can legitimately be held bound by its promise to exempt the
promisee from payment of sales tax.
14. In support of his contention learned senior counsel for the
petitioners refers to the judgment of Century Spg. & Mfg. Co. Ltd.
Vs. Ulhasnagar Municipal Council reported in (1970) 1 SCC 582.
Referring to the judgment it is submitted that If the representation is
acted upon by another person it may, unless the statute governing
the person making the representation provides otherwise, result in
an agreement enforceable at law, if the statute requires that the
Page 24 of 114
agreement shall be in a certain form, no contract may result from the
representation and acting thereupon 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.
Learned Senior Counsel for the petitioners has referred to the
following judgments of the Apex Court:
i) Pournami Oil Mills vs. State of Kerala reported in 1986 Supp SCC 728
ii) State of Bihar vs. Usha Martin Industries Ltd. reported in 1987 Supp SCC 710
iii) Shri Bakul Oil Industries vs. State of Gujarat reported in (1987) 1 SCC 31
iv) Pawan Alloys & Casting (P) Ltd. Vs. UP SEB reported in (1997) 7 SCC 251
v) Mahabir Vegetable Oils (P) Ltd. Vs. State of Haryana reported in (2006) 3 SCC
620
vi) State of Punjab vs. Nestle India Ltd. reported in (2004) 6 SCC 465
vii) Kasinka Trading vs. Union of India reported in (1995) 1 SCC 274
viii) MRF Ltd. Vs. Asstt. CST reported in (2006) 8 SCC 702
ix) State of Jharkhand vs. Brahmaputra Metallics Ltd. In Civil Appeal NO.3860-
3862/ 2020.
15. The further submission of the learned Senior Counsel for the
petitioners is that the State authorities as well as its limbs covered by
the sweep of Article 12 of the Constitution of India being treated as
'State' within the meaning of the said article, can be made subject to
the equitable doctrine of Promissory Estoppel in cases where because
Page 25 of 114
of their representation the party claiming Estoppel has changed its
position and if such an Estoppel does not fly in the face of any
statutory prohibition, absence of power and authority of the promisor
and is otherwise not opposed to public interest, and also when equity
in favour of the promisee does not outweigh equity in favour of the
promisor entitling the latter to legally get out of the promise. Since
the benefits were extended by the Scheme of 2017 after withdrawal
of the Scheme of 2009 in view of enactment of the Assam GST Act,
2017 and power was conferred by the said Scheme of 2017 to
extend the period of eligibility in view of the fact that the benefit of
remission of VAT payable under Assam VAT Act, 2003 as well as
central sales tax payable under CST Act, 1956, was curtailed and
made applicable only in respect of the tax accruing in cash to the
State Government under the Assam Goods & Service Tax Act, 2017,
withdrawal of the said power of extension of the period of eligibility
would amount to denying and curtailment of the benefit as promised
in the Scheme and thereby the withdrawal of the said power by
Scheme of 2020 is absolutely illegal, arbitrary, against the doctrine of
promissory estoppel and is liable to be set aside and/ or quashed. It
is submitted that that the amendment of the proviso to Clause 4(1)(i)
of the Scheme of 2017 is illegal and arbitrary as in view of the
Industrial Policy of Assam, 208 and the Clause 4(1)(i) of the Scheme
Page 26 of 114
of 2017, the Petitioner has its legitimate expectation that the
Petitioner's application for extension of the period of eligibility shall
also be allowed as was allowed in the case of similarly situated
industrial units.
16. Learned Senior Counsel for the petitioners submits that in view
of proviso to clause 4(1)(i) of the Scheme of 2017, the petitioner
expected that in case of the petitioner also the period of eligibility
shall be extended by a further period of 5 years as extended in
respect of other industrial units and thereby the withdrawal of the
said power of extension of the period of eligibility and providing for
that all the orders already issued by the Finance (Taxation)
Department for extension of the period of eligibility shall deemed to
have been validly issued and all pending applications on which order
for extension of period of eligibility has not been passed shall be
deemed to have been rejected would go against the settled
principles of legitimate expectation. It is submitted that the doctrine
of legitimate expectation is one of the ways in which the guarantee
of non-arbitrariness enshrined under Article 14 finds concrete
expression. If denial of legitimate expectation in a given case
amounts to denial of a right that is guaranteed or is arbitrary,
discriminatory, unfair or biased, gross abuse of power or in violation
Page 27 of 114
of principles of natural justice, the same can be questioned on the
well-known grounds attracting Article 14 of the Constitution.
17. In support of his contention he presses into service the
judgment of the Apex Court rendered in Union of India vs. Lt. Col.
P.K. Choudhary reported in (2016) 4 SCC 236 to submit that in the
said matter the Apex Court went on to hold that if denial of
legitimate expectation in a given case amounts to denial of a right
that is guaranteed or is arbitrary, discriminatory, unfair or biased,
gross abuse of power or in violation of principles of natural justice,
the same can be questioned on the well-known grounds
attracting Article 14 of the Constitution but a claim based on mere
legitimate expectation without anything more cannot ipso facto give
a right to invoke these principles.
18. In support of his contention he further referred to the
judgment of the Apex Court rendered Food Corporation of India vs.
Kamdhenu Cattle Feed Industries reported in (1993) 1 SCC 71.
19. Referring to the above judgments it is submitted that in every
State action, the State and all its instrumentalities have to conform to
Article 14 of the Constitution of which non-arbitrariness is a
significant facet. There is no unfettered discretion in public law: A
public authority possesses powers only to use them for public good.
This imposes the duty to act fairly and to adopt a procedure which is
Page 28 of 114
'fairplay in action'. Due observance of this obligation as a part of
good administration raises a reasonable or legitimate expectation in
every citizen to be treated fairly in his interaction with the State and
its instrumentalities, with this element forming a necessary
component of the decision-making process in all State actions. To
satisfy this requirement of non-arbitrariness in a State action, it is,
therefore, necessary to consider and give due weight to the
reasonable or legitimate expectations of the persons likely to be
affected by the decision or else that unfairness in the exercise of the
power may amount to an abuse or excess of power apart from
affecting the bona fides of the decision in a given case. The decision
so made would be exposed to challenge on the ground of
arbitrariness. It is further submitted that that mere reasonable or
legitimate expectation of a citizen may not by itself be a distinct
enforceable right, but failure to consider and give due weight to it
may render the decision arbitrary, and this is how the requirement of
due consideration of a legitimate expectation forms part of the
principle of non-arbitrariness, which is a necessary concomitant of
the rule of law. Every legitimate expectation is a relevant factor
requiring due consideration in a fair decision-making process. It is
therefore submitted that the present Amendment Scheme of 2020 by
which the power to extend the period of eligibility has been
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withdrawn, but for industrial units in respect of which the orders
have already been issued by the Finance (Taxation) Department for
extension of the period of eligibility have been held to be valid and
denying the said benefit only in respect of industries whose
applications are pending is a clear example of the arbitrary action of
the State and such an action of the State cannot be justified on the
touchstone of Article 14 of the Constitution. It is further submitted
that the action of the State or its instrumentality must be in
conformity with some principle which meets the test of reason and
relevance. Functioning of a "democratic form of Government
demands equality and absence of arbitrariness and discrimination".
The rule of law prohibits arbitrary action and commands the
authority concerned to act in accordance with law. Every action of
the State or its instrumentalities should neither be suggestive of
discrimination, nor even apparently give an impression of bias,
favouritism and nepotism. If a decision is taken without any principle
or without any rule, it is unpredictable and such a decision is
antithesis to the decision taken in accordance with the rule of law. It
is respectfully submitted that power vested by the State in a public
authority should be viewed as a trust coupled with duty to be
exercised in larger public and social interest. A decision taken in an
arbitrary manner contradicts the principle of legitimate expectation.
Page 30 of 114
An authority is under a legal obligation to exercise the power
reasonably and in good faith to effectuate the purpose for which
power stood conferred. The powers must be exercised bona fide for
the purpose and for none other. In the present case, it will be clear
that the Amendment Scheme of 2020 by which the power for
extending the period of eligibility has been withdrawn with
immediate effect by providing that only the orders already issued by
the Finance (Taxation) Department for extension of the period of
eligibility shall be deemed to be validly issued and all pending
applications on which order for extension of period of eligibility has
not been passed shall be deemed to have been rejected, clearly
demonstrates that the same was not exercised in good faith and
does not effectuate the purpose for which the said power stood
conferred and the same is not for public at large and thereby the
impugned Scheme of 2020 is violative of Article 14 of the
Constitution. Learned senior counsel for the petitioner further
submits that the industrial units which were established on the basis
of the promises and assurances made in the Policy of 2008 read with
the Scheme of 2009 are a class itself and thereby the further
classification made between such industrial units by denying the
benefit of extension of the time limit for availing the exemption, and
industrial units in respect of which orders for extension of the period
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of eligibility have already been passed prior to omission of proviso to
clause 4(1)(i) of the Scheme of 2017 by the Amendment Scheme of
2020 with effect from 30.12.2020 is an unreasonable classification,
having no nexus with the objects sought to be achieved and thereby
the Scheme of 2020 by which the proviso to clause 4(1)(i) has been
deleted and extension of the period of eligibility has been granted
only in respect of industrial units in respect of which orders have
been passed prior to amendment of the Scheme of 2017 is an
unreasonable class and hit by Article 14 of the Constitution. The
Amendment Scheme of 2020 has treated similarly situated industrial
units in two different manner by making unreasonable classification
and thereby discriminating between industrial similarly situated by
limiting the benefits of extension of the period of eligibility only in
respect of industrial units in respect of which orders for extension of
the period of eligibility have already been passed and such a
discrimination is a hostile discrimination inasmuch as equals have
been treated unequally and thereby such discrimination which is a
hostile classification made under the Scheme of 2020 cannot
withstand the scrutiny of Article 14 of the Constitution of India and
thereby the said classification and/or discrimination is clearly in
violation of Article 14 of the Constitution of India and thereby the
Amendment Scheme of 2020 is liable to be declared illegal and
Page 32 of 114
consequently ultra vires and the respondent authorities are liable to
be directed to also consider the case of the petitioner for extending
the period of eligibility as promised by the Scheme of 2017.
20. Referring to the judgment of the Apex Court in Budhan
Choudhury vs. State of Bihar AIR 1955 SC 191 it is submitted that
while Article 14 forbids class legislation, it does not forbid reasonable
classification for the purposes of legislation. In order, however, to
pass the test of permissible classification two conditions must be
fulfilled, namely, (i) that the classification must be founded on an
intelligible differentia which distinguishes persons or things that are
grouped together from others left out of the group, and (ii) that that
differentia must have a rational relation to the object sought to be
achieved by the statute in question. The classification may be
founded on different bases; namely, geographical, or according to
objects or occupations or the like. What is necessary is that there
must be a nexus between the basis of classification and the object of
the Act under consideration. It is also well established by the
decisions of this Court that Article 14 condemns discrimination not
only by a substantive law but also by a law of procedure.
21. In support of his contention he referred to the judgment of the
Apex Court rendered in Ram Krishna Dalmia vs. SR Tendolkar AIR
Page 33 of 114
1958 SC 538, Nagpur Improvement Trust vs. Vithal Rao reported in
(1973) 1 SCC 500 and EP Royappa vs. State of TN reported in (1974)
4 SCC 3.
22. It is therefore submitted that when any statute and/ or
Notification or Scheme is challenged on a question of its validity
under Article 14 of the Constitution, then in determining the validity
or otherwise of such a statute and/ or Notification or Scheme the
court has to examine whether such classification is or can be
reasonably regarded as based upon some differentia which
distinguishes such persons or things grouped together from those
left out of the group and whether such differentia has a reasonable
relation to the object sought to be achieved by the statute, no matter
whether the provisions of the statute are intended to apply only to a
particular person or thing or only to a certain class of persons or
things. A statute may direct its provisions against one individual
person or thing or to several individual persons or things but no
reasonable basis of classification may appear on the face of it or be
deducible from the surrounding circumstances, or matters of
common knowledge. In such a case the court will strike down the
law as an instance of naked discrimination, as was done by the Apex
Court in Ameerunnissa Begum v. Mahboob Begum [(1953)
SCR 404] and Ramprasad Narain Sahi vs. State of
Page 34 of 114
Bihar [(1953) SCR 1129]. In support of the submissions, the
petitioner also relies on the decision of the Apex Court in State of
UP vs Deepak Fertilizers & Petrochemical Corp. Ltd., (2007)
10 SCC 342.
23. Referring to the various judgments of the Apex Court learned
Senior Counsel for the petitioners submits that every differentiation is
not discrimination but at the same time, differentiation must be
founded on pertinent and real differences as distinguished from
irrelevant and artificial ones. A simple physical grouping which
separates one category from the other without any rational basis is
not a sound or intelligible differentia. The separation or segregation
must have a systematic relation and rational basis and the object of
such segregation must not be discriminatory.
24. Learned Senior Counsel for the petitioners has also referred to
the judgment rendered in Ayurveda Pharmacy vs. State of Tamil
Nadu reported in (1989) 2 SCC 285, Amarendra Kumar Mohapatra
vs. State of Orissa reported in (2014) 4 SCC 583, (1979) 1 SCC 380,
Subramanian Swamy vs. Director, CBI, (2014) 8 SCC 682, Union of
India vs. NS Rathnam and Son (2015) 10 SCC 681, State of UP vs.
Deepak Fertilizers & Petro Chemicals Corp. Ltd. reported in (2007) 10
Page 35 of 114
SCC 342 as well as Makum Tea Co. India Ltd. Vs. State of Assam
reported in (1997) 1 GLR 138.
25. To sum up the argument, learned Senior Counsel for the
petitioners submits that it is clear that when any statute and/ or
Notification or Scheme is challenged on a question of its validity
under Article 14 of the Constitution, then in determining the validity
or otherwise of such a statute and/ or Notification or Scheme the
court has to examine whether such classification is or can be
reasonably regarded as based upon some differentia which
distinguishes such persons or things grouped together from those
left out of the group and whether such differentia has a reasonable
relation to the object sought to be achieved by the statute, no matter
whether the provisions of the statute are intended to apply only to a
particular person or thing or only to a certain class of persons or
things. A statute may direct its provisions against one individual
person or thing or to several individual persons or things but no
reasonable basis of classification may appear on the face of it or be
deducible from the surrounding circumstances, or matters of
common knowledge. In such a case the court will strike down the
law as an instance of naked discrimination. It is also submitted that
by the Amendment Scheme of 2020, by deletion of the power to
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extend the period of eligibility as provided in proviso to clause 4(1)(i)
of the Scheme of 2017 and by a saving clause limiting the benefits of
extension of the period of eligibility only in respect of industrial units
in respect of which orders for extension of the period of eligibility
have already been granted prior to the amendment of the said
Scheme of 2017 with effect from 30.12.2020, similarly placed
industrial units have been treated differently and the same
classification is an unreasonable classification and thereby the said
classification and/ or discrimination is violative of Article 14 of the
Constitution. It is further submitted that just before the amendment
of the Scheme of 2017 by which the powers for extending the period
of eligibility have been deleted, similarly situated industrial units have
been granted extension of the period of eligibility for a further period
of 5 years but the industrial units like that of the petitioner have
been made ineligible for the further extension of the period of
eligibility by an amendment made in the said Scheme of 2017. Even
the industrial units which were established in pursuance to the Policy
of 2014 and the Scheme of 2015 framed in pursuance thereof have
been granted a period a 15 years for availing the benefit of
exemption and even under the Scheme of 2017, they will continue to
enjoy the benefits till expiry of 15 years. The said period of 15 years
was prescribed in the Policy of 2014 and the Scheme of 2015
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keeping in view the fact that goods and service tax was supposed to
be introduced and after the said introduction of the goods and
service tax, the industrial units would not be able to enjoy the
benefits of exemption on the goods sold in the course of inter-state
trade and commerce as well as goods in respect of which tax is to be
levied by the State, the same shall be restricted to a large extent.
However, the industrial units which were established on the promises
and assurances made in the Policy of 2008 and Scheme of 2009 were
granted the benefit of exemption for a period of 7 years only and
under the Scheme of 2017, powers were conferred on the Finance
(Taxation) Department to increase the period of eligibility by a
further period of 5 years to compensate such industrial units from
the curtailment of the benefits of exemption after introduction of the
GST regime. However, after introduction of the Amendment Scheme
of 2020, such powers for extension of the period of eligibility have
been withdrawn and the industrial units established under the Policy
of 2008 and the Scheme of 2009 could not avail the benefits
provided in the said Policy and Scheme prior to the introduction of
GST regime and as such they have been put in a disadvantageous
position and thereby the said Scheme of 2020 is absolutely arbitrary,
illegal and the same is violative of Article 14 and 19 of the
Constitution and thereby the same is liable to be set aside and/ or
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quashed. It is therefore submitted that not only basing on the
Doctrine of Promissory Estoppel but even basing on the Doctrine of
Legitimate Expectation, the petitioner cannot be denied the benefits
under the Industrial Policy of Assam, 2008 and thereby, the
impugned Assam Industries (Tax Reimbursement for Eligible units)
(Amendment) Scheme, 2020 may kindly be declared illegal and
consider the case of the Petitioner for extending the period of
eligibility as per the provisions of the Assam Industries (Tax
Reimbursement for Eligible Units) Scheme, 2017.
26. Per contra, Mr. Devajit Saikia, learned Advocate General,
Assam assisted by Mr. B. Choudhury,, learned Standing Counsel,
Finance and Taxation Department, strongly disputes the contention
placed by the learned Senior Counsel for the petitioners. It is
submitted that the State has contested the case projected by the writ
petitioners by filing their affidavits in WP(C) No. 2068/2021 and
WP(C) No.5200/2021. It is further submitted that since the issues in
WP(C) No.1834/2021 are similar in nature, the stand of the State
respondents reflected in the affidavit will also cover the issues in the
two writ petitions along with WP(C) No.1834/2021. It is submitted
that the stands of the respondent authorities in so far as WP(C)
No.1834/2021 is similar to the stand reflected on WP(C)
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No.2068/2021 and WP(C) No. 2500/2021 and therefore, no separate
affidavit is necessary.
27. It is submitted that in order to give effect to the promises
made in Industrial Policy 2008 and 2014, Assam Industries (Tax
Exemption) Scheme 2009 and the Assam Industries (Tax Exemption)
Scheme 2015 was made with tax exemption for 7 years and 15 years
respectively, subject to monetary ceiling. The Petitioner commenced
its commercial production on 21.09.2013, therefore it is covered
under the Industrial Policy 2008 and the scheme of 2009.
28. Eligibility Certificate was issued by the Industries department
for a period of 7 years w.e.f. 21.09.2013 to 20.09.2020 subject to
the monetary limit of Rs 11,83,54,569.00/-. Subsequently
Entitlement Certificate granting VAT exemption was issued for the
said period.
29. There are two limits under the Industrial Policy 2008, monetary
ceiling and time limit. Scheme 2009 had a clear condition that if the
unit is unable to use its monetary tax incentive within the specified
period of 7 years, the balanced unutilized amount would lapse.
Against the available limit of tax exemption of Rs 1183.54 lacs, the
petitioner availed Rs 456.20 lakhs during VAT i.e. upto 30.06.17 and
Rs 52.88 lakhs during GST i.e. till September 2020. In total it availed
Rs 509.09 lakhs out of the total Rs 1183.54 lakhs i.e. 38 % of the
Page 40 of 114
total amount of tax exemption during 4 years, under VAT regime. It
is submitted that with the introduction of GST w.e.f. 01.07.2017, the
tax exemption of VAT being not compatible with GST, the State Govt.
as a mark of goodwill gesture and to honor its past commitments
introduced, The Assam Industries (Tax Reimbursement for Eligible
Units) Scheme, 2017. Under the Scheme the un-availed/unutilized
amount of monetary incentive and the unexpired time limit were
carried forward in its entirety and they were allowed to claim 100%
reimbursement of SGST.
30. It is submitted that at this stage that the petitioner started
commercial production in the year 2013 under the Industrial Policy of
2008 and whatever incentives were available under the said policy
and its corresponding Scheme of 2009 were granted to the unit by
Eligibility Certificate and Certificate of Entitlement and the unit
enjoyed the same for 5 years during the VAT regime and even
thereafter during the GST regime, so the State Government has not
curtailed the incentive available to the unit in any manner. Rather
even after structural change in tax regime from VAT to GST, the
State Government continued to provide the incentive though
compatible reimbursement mechanism during GST period. In total
the unit enjoyed the incentives utilizing Rs.509.09 Lakhs of its
monetary limit Rs.11,83,54,569/- during VAT and GST regime for last
Page 41 of 114
7 years i.e. 38% of the monetary unit. Subsequently, realizing that
the continuation of the proviso under the Scheme 2017 for extension
was impacting the revenue of the State, more particularly the COVID
period, the Authorities, accordingly issued the Amendment
Notification 30.12.2020, withdrawing the power of extension given to
the Finance (Taxation) Department. Moreover, under the Industrial
Policy 2008 and Scheme 2009, there was no provision for extension
of time limit stated in the Eligibility Certificate. Petitioner's industry
was setup in 2013. So the question of violation of Promissory
Estoppel does not arise.
31. Learned Advocate General, Assam, submits that it is settled
position of law that public interest overrides private interest. The
special provisio of extension introduced in Scheme 2017 has been
withdrawn in public interest by the government considering impact of
Covid-19 on revenue generation of the State. The contention of the
petitioner that discrimination has been made by the Government in
context of Article 14 of the Constitution of India, whereby few
industrial units were granted extension of eligibility prior to the
amendment and the industrial units whose applications were pending
on the effective date of amendment were deemed to be rejected, is
strongly denied and contended. It is a fact that extension of eligibility
has been granted to a few industrial units by the Government during
Page 42 of 114
the time when the clause was in force. It is contended that Article
14, does not forbid classification for legislative purposes, provided
that such classification is based on some differentia having a
reasonable relation to the object and purposes of the law in question.
There is a strong presumption in favour of the validity of legislative
classification and it is for those who challenge it as unconstitutional
to prove beyond all doubt that the legislation arbitrarily discriminates
between different persons similarly circumstanced. It is now well-
settled that though taxing laws are not outside Article 14, however,
having regard to the wide variety of diverse economic criteria that go
into the formulation of a fiscal policy, the legislature enjoys a wide
latitude in the matter of selection of persons, subject-matter, events,
etc., for taxation. The tests of the vice of discrimination in a taxing
law are, accordingly, less rigorous.
32. Learned Advocate General, Assam, submits that no
discrimination done in the context of Article 14, as the withdrawal of
budgetary support was done in respect of all industries regardless of
the Industrial policy under which they were availing the incentives.
33. Learned Advocate General, Assam, submits that the
petitioners' unit commenced its commercial production on
21.09.2013 and was issued Eligibility Certificate for a period of
7(seven) years w.e.f. 21.09.2013 to 20.09.2020 subject to the
Page 43 of 114
monetary limit of Rs.11,83,54,569/-. The tax incentive or the
available time period under 2008 Policy have not been
curtailed/withdrawn/touched in any manner. It is submitted that
when the extension was under the Assam Industries (Tax
Reimbursement for Eligible Units) Scheme, granted 2017, the
position of the petitioner was not altered. Nor was it altered when it
was withdrawn vide Notification No. FTX.113/2017/186 dated
30.12.2020, hence, no prejudice was caused to the petitioner by the
withdrawal of the provision.
34. Learned Advocate General, Assam submits that Clause 2 of the
Amendment 2020 would show that no discrimination has been done
as the withdrawal of budgetary support was done in respect of all
industries regardless of the Industrial Policy under which they were
availing the incentives. It is further submitted that there has been no
violation of Doctrine of Promissory Estoppel in respect of the writ
petitioner because in terms of the stipulations mentioned in the
Eligibility Certificate dated 04.11.15 and Entitlement Certificate dated
20.07.2016, he was given the benefit of tax exemption for a period
of 7 years i.e. 21.09.13 to 20.09.2020 subject to maximum of 100%
of the eligible fixed capital investment i.e. Rs 11,83,54,569/ and
during the said period he had availed tax remission for the whole 7
years i.e. 21.09.13 to 20.09.2020 and received tax exemption
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amounting to 38% of Rs 11,83,54,569/, the maximum fixed capital
investment allowed. Accordingly, the writ petitioner set up
manufacturing unit and started commercial production from
21.09.2013.
35. It is submitted that under the said Industrial Policy 2008 and
Assam Industries (Tax Exemption) Scheme 2009, there is no scope
for extension of tax exemption. The petitioner had acted upon such
incentive as provided under the Industrial Policy 2008 and Scheme
2009 and the State has not denied him in any manner, whatsoever,
from the incentive granted under the aforesaid policy and scheme.
The petitioner has altered his position only on the basis of aforesaid
Policy, 2008 and scheme, 2009, whereas on the other hand when
Scheme 2017 was brought into force, proviso to Clause 4 was
inserted which empowered the Finance(Taxation) Department to
extend the period of eligibility by another 5(five) years, on an
application, if it is satisfied that the eligible unit could not achieve the
full quantum of monetary ceiling for a genuine reason and to sustain
the Industrial Unit, it is necessary. Thus under Scheme 2017, the
petitioner has not altered his position, rather he continued to enjoy
the earlier incentives. From the pleading and submissions, it is
abundantly clear that the petitioner has not altered his position
pursuant to Scheme, 2017, as he was already reaping the benefit
Page 45 of 114
under the Industrial Policy, 2008 and Tax exemption Scheme, 2009
in terms of the Eligibility Certificate and Entitlement certificate issued
there under.
In that view of the matter the State has not resile from its
promise on the basis of which the petitioner changed his position and
invested for expansion.
36. It is submitted that there has been no discrimination in favour
of certain entities leading to violation of Article 14 of the Constitution
of India. In case of any extension under Clause 4 of Scheme 2017,
the same was done as and when the Scheme was in force i.e. till the
amendment, 2020 notified on 30.12.2020. The entity who was issued
extension as alleged in the petition, submitted his application for
extension vide application dated 22.03.2019, 27.06.2019 and
29.08.2019. Thereafter, it took more than 11/2 year to process the
application for extension, as the same required assessment and
verification to determine the fulfillment of the conditions mentioned
under proviso to Clause 4(i) of the Scheme, 2017. It is a long drawn
process, no mechanical. Subsequent thereto the Commissioner of
Taxes has to obtain approval of the Government. In respect of
application dated 18.08.2020 of the petitioner, the same could not be
processed and disposed of before issuance of Amendment, 2020 i.e.
30.12.2020, due to shortage of material and time. Moreover, there is
Page 46 of 114
no prayer in the writ petition alleging grievance on any purported
ground of delay and laches by the Department.
37. Referring to the judgment of the Apex Court in K asinka Trading
& Another vs. Union of India & Others reported in (1995) 1 SCC 274,
it is submitted that Promissory Estoppel will not be applicable, if the
change in the stand of the Government is made on account of public
policy. Similarly it is submitted that in Shrijee Sales Corporation &
Another vs. Union of India reported in (1997) 3 SCC 398 the Apex
Court held that in cases of supervening public interest, the Doctorine
of Promissory Estoppel cannot be invoked against the State. In Dai-
Ichi Karkaria Ltd. Vs. Union of India & Others reported in (2004) 4
SCC 57 the Apex Court held that the Government can resile from a
promise even if there is no manifest public interest involved provided
no one is put to adverse. This view of the Apex Court in Union of
India vs. VVF Ltd reported in (2020) 20 SCC 57 wherein it is held that
once public interest is accepted as the superior equity which can
override individual equity, the doctrine of Promissory Estoppels will
not be applicable even in the case where a period has been indicated
for the operation of the promise. Reference is also made to the
recent of judgment of the Apex Court in Hero Moto Corp Limited vs.
Union of India & Others reported in (2023) 1 SCC 386 to submit that
three of Promissory Estoppels would not be available against the
Page 47 of 114
exercise of legislative functions of the State. Reference is also made
in judgment of Apex reported in Seema Silk & Sarees vs. Directorate
of Enforcement reported in (2008) 5 SCC 580 to submit that the
discrimination on the ground of valid classification which answers the
test of intelligible differentia does not attract the wrath of the Article
14.
38. Learned Advocate General, Assam, sums up his argument to
submit that there is no violation of Doctrine of Promissory Estoppels,
no infringement of Article 14 of the Constitution of India, no
discrimination or classification without reasonable or cogent ground.
Thus, all the writ petitions are liable to be dismissed.
39. Learned Senior Counsel for the petitioners reiterating his
arguments submits that if fund crunch was the ground for non-
consideration of the petitioners' application for extension then the
same criteria ought to have been made applicable to all other
similarly situated units/industries. Referring to one such instance of
an application preferred by Varun Beverages Limited (Unit-II) it is
submitted that the said unit also filed an application seeking
extension of the period of exemption after coming into force the GST
regime, and their application was duly considered and extension was
granted to the said unit. It is submitted that this extension was
granted to the said industry by the order dated 09.11.2020 and the
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validity period indicated in the certificate of entitlement issued to the
said industry stood extended upto 01.03.2025. It is submitted that
there is no explanation by the respondent authorities as to why the
benefits conferred to the said Industry were not extended to the writ
petitioner. The application filed by the writ petitioners were kept
pending without there being any reasonable explanation and
subsequently, by notification dated 30.12.2020 (Annexure-9 to the
writ petition) all applications in which extension of the period of
eligibility has not been passed shall be deemed to have been
rejected. Such pick and choose method and differentiate yard stick
adopted by the respondents authorities are discriminatory and
arbitrary per se and therefore, they are hit by article 14 and the
impugned notification dated 30.12.2020 be set aside and quashed
and appropriate direction be issued to the authorities to consider the
application of the writ petitioners and grant necessary exemption to
avail the benefits as was granted under the Industrial Policy of
Assam, 2008. It is submitted that the Apex Court has elaborately
laid down the principles governing accrued rights. The impugned
notification dated 30.12.2020 issued by the respondent authorities as
the effect of taking away the rights accrued to the writ petitioners of
being considered similarly by the same yardstick as have been done
on the cases of other similarly situated industries. Such accrued
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rights of the writ petitioners cannot be taken away that too by
deeming fiction. It is also submitted that delegated legislations
cannot take away accrued rights. In support of his contention he has
referred to the judgment of the Apex Court rendered in Manish
Kumar vs. Union of India reported in (2021) 5 SCC 1, Union of India
& Another vs. M/s Asian Food Industries reported in (2006) 13 SCC
542, State of Haryana vs. M/s Mahabir Vegetable Oils Pvt. Ltd.
reported in (2006) 3 SCC 620.
40. Learned counsel for the parties have been heard and the
pleadings available on record have been carefully perused.
41. From the elaborate arguments advanced at the Bar, the
grievance of the petitioners are three folds namely:
a) The petitioners having altered their position in response to the
promises made by the Government under the Industrial Policy
of 2008 and the Assam Tax Exemption Scheme of 2009, and
the petitioners having made the required investments and have
been granted the eligibility and the entitlement certificates
clearly indicating the period till which their the benefits of VAT
exemptions are to be granted, the subsequent curtailment of
this benefit after the GST regime is violative of the doctrine of
promissory estoppel.
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b) The extension of benefits granted to other similarly situated
persons while denying the similar benefits to the writ
petitioners are discriminatory without any reasonable basis and
the same being arbitrary and the same are violative of Article
14 of the Constitution of India.
c) The application of the writ petitioners having been filed before
the authorities seeking extension of the benefit prior to the
date of the Tax Exemption (Amendment) Scheme 2000, their
applications ought not to have been kept pending and thereby
rendering it nugatory after the notification dated 30.07.2020
whereby the Assam Industries (Tax reimbursement for eligible
units) Scheme 2017 was further amended by rejecting all
pending applications by a deeming provision. Such rejection
that too by a deeming provision by way of a delegated
legislation is not permissible and therefore the same is
unauthorized, illegal and it had the effect of turning the
accrued rights of the writ petitioners and therefore needs to be
interfered with and set aside.
42. In order to appreciate the arguments made, it is necessary to
refer to the benefits extended by the respondents and which the
petitioners claim have been subsequently curtailed. The Government
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of Assam announced various incentives under the Industrial Policy of
Assam 2008 for establishment and setting up of Industries for the
Development and progress of the State as well as for generating
employment avenues. Certain specific industries were given. Special
emphasis for aims and objectives of the Industrial Policy are as
under:
AIMS AND OBJECTIVES
1) To generate economic development by accelerating the process of
industrialization.
2) To general employment and increase income by encouraging the
establishment of micro enterprises.
3) To increase the share of the Industrial sector in the State Domestic
Product (SDP).
4) To make Nature-Economics Centric Development.
5) To make Agro and rural area linked industrial investment as focused
programme.
Besides, the State Government would endeavour to encourage youths
of the State, particularly the women entrepreneurs to set up
industries, encourage to help increase exports and attract Foreign
Direct Investment (FDI) particularly from NRIs.
43. The validity of the Industrial Policy is also specified.
PERIOD OF VALIDITY OF THE POLICY
The policy will be effective from 01.10.2008 and will be valid for a period
of 5 years, i.e. up to 30.09.2013. All new units as well as existing units
which go in for substantial expansion and which commence commercial
production within the period of validity will be eligible for the incentives
from the date of commencement of commercial production for the period
applicable for each incentive.
44. The effective date of the new policy is also specified.
EFFECTIVE DATE
Effective date for the new policy shall be 01.10.2008 and from that date
the 2003 policy will cease to operate unless otherwise provided for.
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Units which commenced commercial production prior to 01.10.2008 and
are eligible under 2003 policy shall continue to be governed by the
Industrial Policy 2003.
However no application for Eligibility Certificate claims under the 200
Policy will be entertained after 31.03.2009.
45. The various definitions of existing unit, new unit, substantial
expansion etc has also been provided under Clause 4.5 which reads
as under:
4.5 DEFINITIONS
1) EXISTING UNITmeans a unit, which is or was in commercial
production in the State of Assam prior to 1/10 /2008.
2) NEW UNIT means a unit, which has commenced commercial
production in the State of Assam during the validity period of Industrial
Policy 2008.
3) SUBSTANTIAL EXPANSION means increase in value of fixed capital
investment in plant and machinery of an existing unit by at least 25% as
well as increase of employment by at least 10% and at least 25%
increase in production compared to average annual production of previous
three years. Prior to going for expansion, the unit should be operating at
least at a minimum of 80% capacity during the period of three previous
years and prior intimation to the concerned implementing agency.
4) NON-ELIGIBLE UNIT Non-eligible unit means those industries,
which are declared as Non-eligible under this policy.
5) MANUFACTURE means any activity that brings out a change in an
article or articles as a result of some process, treatment, labour and
results in transformations into a new and different article so understood in
commercial parlance having a distinct name, character use, but does not
include such activity of manufacture as may be prescribed by Finance
Department.
6) MICRO/SMALL/MEDIUM ENTERPRISE: As defined in the Micro,
Small and Medium Enterprises Development Act, 2006 as amended from
time to time.
7) INDUSTRIAL ESTATE/PARK under this policy means an area not
less than 500 bighas with infrastructure facilities or built up space with
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common facilities for the purpose of industrial use commensurate with the
master plan of the district or town or city as applicable. Minimum 25%
area is to be left for open space and green belt and minimum 10% area
for common utility.
46. The Eligibility Criteria is also specified under 4.6 which reads as
under:
4.6 ELIGIBILITY CRITERIA
Unless otherwise specified, the eligibility criteria shall be as below:
a) A unit that is engaged in the manufacture or production of goods
pertaining to any industry specified in the First Schedule to the Industries
(Development and Regulation) Act, 1951 is eligible.
b) New Units set up on or after 1/10/2008 as well as existing units
undergoing substantial expansion at the same place in the State of Assam
on or after 01-10- 2008 shall be eligible for incentives under 2008
Industrial Policy provided that for the units undergoing substantial
expansion, the fiscal incentives will be only against the additional
investments made on plant & machineries.
c) A unit shall have employment of 80% people of Assam in the
managerial cadre and 90% people of Assam in the non-managerial cadre
and that over a period of 5 years from the commencement of commercial
production, such unit would take all effective steps to ensure 100%
employment of people of Assam in nonmanagerial cadre and at least 90%
in managerial post.
d) A unit availing grants/incentives from a Department/ an agency under
the State/ Central Government/ foreign agencies shall not be eligible for
similar type of incentives under this policy.
e) Incentives/ subsidies/ concessions/ financial support under this policy
shall be applicable to units in the private sector, joint sector, co-operatives
as well as units set up by State Government only.
f) The non-eligible industries mentioned in annexure one will not be
eligible for any incentives under this Industrial Policy.
g) In case a new unit is promoted in the premises of an existing unit; it
should be distinctly identifiable and be located in the open spaces
available in the premises. The earlier unit in the premise should not be
closed nor any plant & machinery be dislodged from the earlier unit.
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47. Amongst the various fiscal incentives prescribed under the
policy, the tax incentive includes VAT exemption. Under Clause 7.1
delineates the VAT exemption as under:
7.1 VAT EXEMPTION
All eligible units, which manufacture goods in Assam, will be entitled to
exemption of 99% of the tax payable under the Assam Value Added Tax
Act, 2003 and the Central Sales Tax Act, 1956 subject to the limit
mentioned below.
Category Micro Small Medium & Large
New Seven years Seven years Seven years
subject to subject to subject to
maximum of maximum of 15% maximum of
200% of fixed of fixed capital 100% capital
capita investment investment investment
Substantial Seven years Seven years Seven years
Expansion subject to subject to subject to
maximum of maximum of maximum of 90%
150% of 100% of of additional fixed
additional fixed additional fixed capital investment
capital investment capital investment
Fixed capital investment means & includes investment in plant & machinery
or additional investment in plant & machinery (for expansion units) and
building connected directly with manufacturing process.
In case of micro industries only, cost of land purchased up to 40% of total
investment in plant and machinery, can be included as part of fixed capital
investment.
The Finance Department of Government of Assam shall be the
implementing agency for tax incentives. The Finance Department will bring
out a separate notification in this regard.
48. In order to give effect to the VAT exemptions under the
Industrial Policy, the Finance Department, Government of Assam
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notified the Industrial (Tax Exemption) Scheme 2009 vide
Notification dated 03.11.2009. Clause 2 of the said scheme
categorizes eligibility units under three categories namely:
Category "A":- A new unit, which manufactures goods in Assam and has
commenced commercial production on or after 1st October, 2008 but upto
30th September, 2013 and is in compliance with the eligibility criteria
under this Scheme shall be treated as an unit eligible for benefit under
this Scheme under category "A"
In case, a new unit is promoted in the premises of an existing unit it
should be distinctly identifiable and be located in the open spaces
available in the premises. The earlier unit in the premise should not be
closed nor any plant and machinery be dislodged from the earlier unit.
Category "B":- An existing unit, which manufactures goods in Assam,
which undertakes substantial expansion and such substantial expansion is
completed and commercial production after such substantial expansion
commences on or after 1st October, 2008 but upto 30th September, 2013
and is in compliance with the eligibility criteria under this Scheme shall be
treated as an eligible unit under category "B"
"Substantial Expansion" means increase in value of fixed capital
investment in plant and machinery of an existing unit by at least 25% as
well as increase of employment by at least 10% and at least 25%
increase in production compared to average annual production of previous
3 years. Prior to going for expansion, the unit should be operating at
least at a minimum of 80% capacity during the period of 3 previous years
and prior intimation to the concerned implementing agency.
Category "C":- An existing unit, which manufactures goods in Assam
and has been declared sick by BIFR or as Assam Government Relief
Undertaking and has recommended commercial production on or after 1st
October, 2008 but upto 30th September, 2013 and is in compliance with
the eligibility criteria under this Scheme shall be treated as an eligible unit
under category "C".
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Provided that there should be increase by not less than 25% in the
value of fixed capital assets in plant and machinery for revival of a unit
under category "C".
49. That apart all these three categories were also required to fulfill
the criteria specified therein namely:
(a) A unit shall have employment of 80% from amongst people of Assam
in the managerial cadre and 90% from amongst people of Assam in
the non-managgerial cadre and that over a period of five years from
the commencement of commercial production, such unit would take all
effective steps to ensure 100% employment from amongst people of
Assam in non-managerial cadre and at least 90% in managerial cadre.
(b) A unit availing grants/incentives from a Department/an agency under
the State/Central Government/Foreign agencies shall not be eligible
for similar type of incentive under this Scheme.
(c) The units engaged in manufacture of following categories of goods
shall not be eligible for any benefit under this Scheme:-
1. All goods falling under Chapter 24 of the First Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986) which pertains to
tobacco and manufactured tobacco substitutes.
2. Pan Masala as covered under Chapter 21 of the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986).
3. Plastic carry bags of less than 20 microns as specified by Miniw54y
Of Environment and Forests Notification No. S.O 705(E) dated
02.09.1999 and S.O. 698(E) dated 17.06.2003.
4. Goods falling under Chapter 27 of the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986) produced by petroleum or gas
refineries.
5. Benefits under this policy will not be admissible to goods in respect
of which only peripheral activities like preservation during storage,
cleaning operation, packing, re-packing, labeling or re-labeling,
sorting, alteration of retail sale price takes place.
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50. Clause 3 of the said scheme prescribes the limits of Tax
exemption for the eligible units. For the three categories, namely
category A, B, and C, the same being relevant for the purposes of
the present proceedings are also extracted below:
Category Micro Small Medium and large
"A" Seven years Seven years Seven years
subject to subject to subject to
maximum of maximum of maximum of
200% of fixed 150% of fixed 100% of fixed
capital investment capital investment capital investment
"B" Seven years Seven years Seven years
subject to subject to subject to
maximum of maximum of maximum of 90%
150% of 100% of of additional fixed
additional fixed additional fixed capital investment
capital investment capital investment
"C" Three years Three years Three years
subject to subject to subject to
maximum of maximum of maximum of
100% of 100% of 100% of
additional additional additional
investment made investment made investment made
for rehabilitation for rehabilitation for rehabilitation
51. Separate formats for grant of eligibility certificates for each of
the categories namely category A, B and C are also appended to the
said scheme. The format for grant of eligibility certificate for each of
the categories are also appended to the said scheme.
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52. In so far as M/S Lalit Poly Weave LLP [W.P(C) No. 2068/2021]
is concerned the eligibility certificate was issued on 04.11.2015. In
the said certificate, VAT exemption was shown to have been
approved with effect from 21.09.2013 to 20.09.2020 (07 years)
subject to a maximum of 100% of the eligible fixed capital
investment of the unit i.e Rs. 11,83,54,569/-. Pursuant to the
issuance of the eligibility certificate, the certificate of entitlement for
exemption of tax to the extent of Rs. 11,83,54,569/- was also issued
by the Commissioner of Taxes, Department of Finance and Taxation,
Government of Assam. The certificate was shown to be valid from
21.09.2013 to 20.09.2020 and the certificate was issued on
20.07.2016.
53. In so far as the M/S Ramdhenu Packaging Solutions [W.P(C)
No. 2500/2021] is concerned the eligibility certificate was issued on
11.08.2014. In the said certificate, VAT exemption was shown to
have been approved with effect from 25.02.2013 to 24.02.2020 (07
years) subject to a maximum of 150% of the eligible fixed capital
investment of the unit i.e Rs. 14710497/-. Pursuant to the issuance
of the eligibility certificate, the certificate of entitlement for
exemption of tax to the extent of Rs. 14710497/- was also issued by
the Commissioner of Taxes, Department of Finance and Taxation,
Government of Assam. The certificate was shown to be valid from
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25.02.2013 to 24.02.2020 and the certificate was issued on
09.01.2015.
54. In so far as the M/S Eco Tech Papers [W.P(C) No. 1834/2021]
is concerned the eligibility certificate was issued on 08.02.2016. In
the said certificate, VAT exemption was shown to have been
approved with effect from 26.02.2014 to 25.02.2021 (07 years)
subject to a maximum of 100% of the eligible fixed capital
investment of the unit i.e Rs. 59,68,70,405/-. Pursuant to the
issuance of the eligibility certificate, the certificate of entitlement for
exemption of tax to the extent of Rs. 59,15,16,915/- was also issued
by the Commissioner of Taxes, Department of Finance and Taxation,
Government of Assam. The certificate was shown to be valid from
26.02.2014 to 25.02.2021 and the certificate was issued on
14.11.2018
55. With effect from 01.07.2017, the GST regime came into effect
and it subsumed the Central Tax, State Tax and Central Excise Laws.
After the GST regime came into effect, the Finance Department,
Government of Assam issued a Notification dated 19.01.2018
whereby the Finance Department, Government of Assam notified the
Assam Industries (Tax reimbursement for eligible Unit) Scheme
2017. The scheme was brought in to provide the reimbursement of
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taxes paid under the Assam Goods and Service Tax Act, 2017 to the
following industries:
(a) to the eligible existing units operating in the State under the
Industrial and Investment Policy of Assam, 2008 or under the
Industrial and Investment Policy of Assam, 2014 and covered by
earlier schemes or special notifications, to the extent of un-availed
monetary incentives and for residual or un-expired time limit for which
each of the units is eligible, and
(b) to the eligible new units or expansion units which commences
their commercial production/operation during the period commencing
from 1st July, 2017 to 31st December, 2022 in terms of the eligibility
criteria of Industrial and Investment Policy of Assam, 2014.
55.1. Under the said scheme, the definitions prescribed would
be relevant and the same are therefore extracted below:
"2. Definitions-
(a) 'eligible unit' means-
(i) 'existing unit' which, commenced its commercial production or
operation before 1st day of July, 2017 and was eligible to avail the
benefit of partial or full exemption from payment of VAT and/or
central sales tax under the Industrial and Investment Policy of
Assam, 2008 or under the Industrial and Investment Policy of
Assam, 2014, as the case may be, and covered by the
corresponding earlier schemes i.e. the earlier Assam Industries
(Tax Exemption) Scheme, 2009 or the Assam Industries (Tax
Exemption) Scheme, 2015 or any special notification issued
pursuant to such Policy of 2008 or Policy of 2014;
(ii) 'expansion unit' which undertakes substantial expansion and
commences its commercial production during the period
commencing from 1st July, 2017 to 31st December, 2022 in terms
of the eligibility criteria of Industrial and Investment Policy of
Assam, 2014.
Explanation- "substantial expansion" means increase in value of
initial fixed capital investment of a new or existing unit by at least
10% as well as increase in employment by at least 10% and at
least 25% increase in production compared to average annual
production of previous 3 years. Prior to going for substantial
expansion, the unit should be operating at least at an average of
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75% of its installed total capacity during the period of 3 previous
years;
(iii) 'new unit' which commences its commercial
production/operation during the period commencing from 1st July,
2017 to 31st December, 2022 in terms of the eligibility criteria of
Industrial and Investment Policy of Assam, 2014 and it includes
hotels/ resorts above 2 star category and river cruise.
(b) 'residual period' means the period remaining for availment of tax
reimbursement on the date of commencement of the Assam Goods
and Services Tax Act, 2017 out of the total period from the date of
commencement of commercial production or operation, as specified
under the relevant earlier schemes, during which the eligible unit
would have been eligible to avail exemption:
(c) 'un-availed quantum of monetary ceiling' means the remaining
amount of monetary ceiling which has not been availed of or utilized
by an eligible unit on the date of commencement of the Assam Goods
and Services Tax Act, 2017 out of the total amount of monetary
ceiling of tax exemption calculated on the basis of certain percentage
of capital investment as available to such unit under the relevant
earlier schemes or special notifications."
55.2 The said scheme is shown to be applicable to the existing
eligible units which are eligible for full or partial exemptions under
the Assam Industries (Tax Exemption) Scheme, 2009 framed
pursuant to Industrial and Investment Policy of Assam, 2008 and the
Assam Industries (Tax Exemption) Scheme, 2015 framed pursuant to
Industrial and Investment Policy of Assam, 2014.
55.3. The determination of the amount to be reimbursed is provided
under Clause 4. For the purposes of the present proceedings proviso
to Clause 4(ii) is very relevant and as such the entire Clause 4(ii) is
extracted below:
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"(ii) For existing unit eligible under the Industrial and Investment
Policy of Assam, 2014;- where an existing eligible unit is holder or will
be holder of Certificate of Entitlement in due course as per the terms
of the Assam Industries (Tax Exemption) Scheme, 2015 framed
pursuant to the Industrial and Investment Policy of Assam, 2014 or an
existing eligible mega unit to which the customized tax incentives
have been granted by special notification issued by the Finance
(Taxation) Department, pursuant to the Industrial and Investment
Policy of Assam, 2014, shall, in respect of intra-State supplies made
within the State, be entitled to reimbursement of 100% of the State
tax (SGST) paid through debit in the electronic cash ledger account
maintained by the unit in terms of sub-section (1) of section 49 the
Assam Goods and Services Act, 2017 after utilization of the input tax
credit of the State tax (SGST) and Integrated tax (IGST) available
until the amount of such tax reimbursement exceeds the un-availed
quantum of monetary ceiling or till the expiry of residual period of
eligibility, whichever is earlier, irrespective of condition of capacity
utilization:
Provided that if an existing eligible unit including a Mega Unit
to which the customized tax incentives have been granted, is unable
to utilize or avail of the full amount of monetary ceiling within the
specified period of exemption, it may make an application to the
Finance (Taxation) Department for extension of period of eligibility.
Upon examination of such an application, if the Finance (Taxation)
Department is satisfied that the unit could not or is not in a position to
attain the full quantum of monetary ceiling due to some genuine
reasons and in order to sustain the industrial unit, it is necessary to
extend such time limit, it may, by an order, extend such time limit by
a further period not exceeding five years."
55.4. Under Clause 5(3), a negative list is also prescribed
showing certain industries which are not eligible for tax
reimbursement. The items produced by the present writ petitioners
are not included in the negative list.
56. In terms of the proviso to Clause 4(ii), the petitioners'
industries filed their respective representations before the Finance
and Taxation Department requesting for extension of the certificate
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of entitlement for the additional period. While their applications
remained pending by Notification dated 30.12.2020. The further
amendment was brought to Clause 4 in sub-clause (1) whereby the
proviso in Sub clause 4(1), sub-para (i) and sub-para (ii) came to be
omitted. However, it was provided in the said Notification that all
orders passed for extension of period of eligibility by the Finance and
Taxation Department shall be deemed to be validly issued as if this
scheme has not been amended and further all pending applications
on which orders for extension of the period of eligibility have not
been issued, shall be deemed to have been rejected. The said
Notification dated 30.12.2020 is also extracted below:
"GOVERNMENT OF ASSAM
ORDERS BY THE GOVERNOR
FINANCE (TAXATION) DEPARTMENT
NOTIFICATION
The 30th December, 2020
No. FTX.113/2017/186.- Whereas it is expedient to amend the Assam
Industries (Tax Reimbursement for Eligible Units) Scheme, 2017
(hereinafter referred to as the "said Scheme"), the Governor of Assam is
hereby pleased to amend the said Scheme, hereinafter referred to as the
principal scheme, namely: --
1. Short title and commencement. -
(1) This Scheme may be called the Assam Industries (Tax
Reimbursement for Eligible Units) (Amendment) Scheme, 2020.
(2) This Scheme shall come into force with effect from the date of
publication of this notification in the Official Gazette.
2. Amendment of clause 4.
In the principal scheme, in clause 4, in sub-clause (1).-
(a) in para (i), for the punctuation mark ":", the punctuation mark "."
shall be substituted and thereafter the existing proviso shall be omitted;
(b) in para (ii), for the punctuation mark ":", the punctuation mark "."
shall be substituted and thereafter the existing proviso shall be omitted;
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(c) in para (iii), sub-para (c) shall be omitted.
3. Savings.-_ Notwithstanding the omission of the provisions in the said
Scheme as mentioned in clause 2 above, all orders issued thereunder by
the Finance (Taxation Department for extension of period of eligibility
shall be deemed to have been validly issued, as if this Scheme has not
been amended. Further, all pending applications on which order for
extension of period of eligibility has not been passed, shall be deemed to
have been rejected.
SHYAM JAGANNATHAN,
Commissioner & Secretary to the Government of Assam,
Finance (Taxation) Department"
57. As discussed above, the petitioner has assailed the validity of
the amendments and the non-issuance of appropriate order by the
Finance (Taxation) Department for extension of the period of
eligibility in respect of the writ petitioners on the ground that they
are violative of the doctrine of promissory estoppel and further the
extensions have been granted to other similarly situated industries
while similar benefits have been denied to the writ petitioners and
therefore they are facing hostile discrimination in the hands of the
department which is arbitrary and therefore violative of Article 14.
58. It will now be apposite to refer to the various Judgments
referred placed before this Court to examine the doctrine of
promissory estoppel as urged by the writ petitioner.
59. In Motilal Padampat Sugar Mills Co. Ltd. Vs. State of UP,
reported in (1979) 2 SCC 409, the Apex Court reiterated the pre
conditions for the operation of the Doctrine of Promissory estoppels
as under:
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(1) a clear and unequivocal promise knowing and intending that it
would be acted upon by the promisee;
(2) such acting upon the promise by the promisee so that it would be
inequitable to allow the promisor to go back on the promise.
The Court further observed that that the doctrine was not limited only to
cases where there was some contractual relationship or other pre-existing
legal relationship between the parties. The principle would be applied
even when the promise is intended to create legal relations or affect a
legal relationship which would arise in future. The Government was held
to be equally susceptible to the operation of the doctrine in whatever area
or field the promise is made -- contractual, administrative or statutory.
Further in para 8 and 24 the Apex Court observed as under:
"[E]quity will, in a given case where justice and fairness demand, prevent
a person from insisting on strict legal rights, even where they arise, not
under any contract, but on his own title deeds or under statute."
"The law may, therefore, now be taken to be settled as a result of this
decision, that where the Government makes a promise knowing or
intending that it would be acted on by the promisee 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 the promisee,
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 299 of the Constitution.
The Apex Court further in the said judgment in para 33 observed as
under:
"Whatever be the nature of the function which the Government is
discharging, the Government is subject to the rule of promissory estoppel
and if the essential ingredients of this rule are satisfied, the Government
can be compelled to carry out the promise made by it ."
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So far as the limitation of the Doctrine of Promissory Estoppel is
concerned the Apex Court in the said judgment, Motilal Padampat
(Supra), held as under:
"1) Since the doctrine of promissory estoppel is an equitable doctrine, it
must yield when the equity so requires. But it is only if the Court is
satisfied, on proper and adequate material placed by the Government,
that overriding public interest requires that the Government should not be
held bound by the promise but should be free to act unfettered by it, that
the Court would refuse to enforce the promise against the Government.
(2) No representation can be enforced which is prohibited by law in the
sense that the person or authority making the representation or promise
must have the power to carry out the promise. If the power is there, then
subject to the preconditions and limitations noted earlier, it must be
exercised. Thus, if the statute does not contain a provision enabling the
Government to grant exemption, it would not be possible to enforce the
representation against the Government, because the Government cannot
be compelled to act contrary to the statute. But if the statute confers
power on the Government to grant the exemption, the Government can
legitimately be held bound by its promise to exempt the promisee from
payment of sales tax."
60. In Century Spg. & Mfg. Co. Ltd. v. Ulhasnagar Municipal
Council, reported in (1970) 1 SCC 582 : (1970) 3 SCR 854 , the Apex
Court held that If the representation is acted upon by another person
it may, unless 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 thereupon but the law is not powerless to raise in
Page 67 of 114
appropriate cases an equity against him to compel performance of
the obligation arising out of his representation.
61. In Pournami Oil Mills v. State of Kerala, reported in 1986 Supp
SCC 728 : 1987 SCC (Tax) 134, the Government of Kerala by an
order dated 11-4-1979 invited small-scale units to set up their
industries in the State of Kerala and with a view to boost
industrialisation, exemption from sales tax and purchase tax was
extended as a concession for a period of five years, which was to run
from the date of commencement of production. By a subsequent
notification dated 29-9-1980, published in the gazette on 21-10-
1980, the State of Kerala withdrew the exemption relating to the
purchase tax and confined the exemption from sales tax to the limit
specified in the proviso of the said notification. While quashing the
subsequent notification, it was observed:
"If in response to such an order and in consideration of the
concession made available, promoters of any small-scale concern
have set up their industries within the State of Kerala, they would
certainly be entitled to plead the rule of estoppel in their favour when
the State of Kerala purports to act differently. Several decisions of this
Court were cited in support of the stand of the appellants that in
similar circumstances the plea of estoppel can be and has been
applied and the leading authority on this point is the case of M.P.
Sugar Mills [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.,
(1979) 2 SCC 409 : 1979 SCC (Tax) 144] . On the other hand,
reliance has been placed on behalf of the State on a judgment of this
Page 68 of 114
Court in Bakul Cashew Co. v. STO [(1986) 2 SCC 365 : 1986 SCC
(Tax) 385] . In Bakul Cashew Co. case [(1986) 2 SCC 365 : 1986 SCC
(Tax) 385] this Court found that there was no clear material to show
any definite or certain promise which had been made by the Minister
to the persons concerned and there was no clear material also in
support of the stand that the parties had altered their position by
acting upon the representations and suffered any prejudice. On facts,
therefore, no case for raising the plea of estoppel was held to have
been made out. This Court proceeded on the footing that the
notification granting exemption retrospectively was not in accordance
with Section 10 of the State Sales Tax Act as it then stood, as there
was no power to grant exemption retrospectively. By an amendment
that power has been subsequently conferred. In these appeals there
is no question of retrospective exemption. We also find that no
reference was made by the High Court to the decision in M.P. Sugar
Mills case [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.,
(1979) 2 SCC 409 : 1979 SCC (Tax) 144] . In our view, to the facts of
the present case, the ratio of M.P. Sugar Mills case [Motilal Padampat
Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 : 1979 SCC
(Tax) 144] directly applies and the plea of estoppel is unanswerable.
... Such exemption would continue for the full period of five years
from the date they started production. New industries set up after 21-
10-1980 obviously would not be entitled to that benefit as they had
notice of the curtailment in the exemption before they came to set up
their industries."
62. The said decision was followed in a three-Judge Bench in State
of Bihar v. Usha Martin Industries Ltd., reported in 1987 Supp SCC
710 : 1988 SCC (Tax) 116 where it was stated that the matter stands
concluded by the decision in Pournami Oil Mills case. In Shri Bakul Oil
Industries v. State of Gujarat, reported in (1987) 1 SCC 31 : 1987
Page 69 of 114
SCC (Tax) 74 : AIR 1987 SC 142, it was observed in paragraph 11 as
under
"The exemption granted by the Government, as already
stated, was only by way of concession for encouraging
entrepreneurs to start industries in rural and undeveloped
areas and as such it was always open to the State
Government to withdraw or revoke the concession. We
must, however, observe that the power of revocation or
withdrawal would be subject to one limitation viz. the power
cannot be exercised in violation of the rule of promissory
estoppel. In other words, the Government can withdraw an
exemption granted by it earli11er if such withdrawal could
be done without offending the rule of promissory estoppel
and depriving an industry entitled to claim exemption from
payment of tax under the said rule. If the Government
grants exemption to a new industry and if on the basis of
the representation made by the Government an industry is
established in order to avail the benefit of exemption, it
may then follow that the new industry can legitimately raise
a grievance that the exemption could not be withdrawn
except by means of legislation having regard to the fact
that promissory estoppel cannot be claimed against a
statute."
63. In Pawan Alloys & Casting (P) Ltd. v. U.P. SEB, reported in
(1997) 7 SCC 251 answering the question as to whether the Board
can be restrained from withdrawing a rebate prematurely before
Page 70 of 114
completion of three/five years period by virtue of promissory
estoppel, the Apex Court held as under:
"10. It is now well settled by a series of decisions of this
Court that the State authorities as well as its limbs like the
Board covered by the sweep of Article 12 of the Constitution
of India being treated as 'State' within the meaning of the
said article, can be made subject to the equitable doctrine
of promissory estoppel in cases where because of their
representation the party claiming estoppel has changed its
position and if such an estoppel does not fly in the face of
any statutory prohibition, absence of power and authority of
the promisor and is otherwise not opposed to public
interest, and also when equity in favour of the promisee
does not outweigh equity in favour of the promisor entitling
the latter to legally get out of the promise.
***
24. … We, therefore, agree with the finding of the High
Court on Issue 1 that by these notifications the Board had
clearly held out a promise to these new industries and as
these new industries had admittedly got established in the
region where the Board was operating, acting on such
promise, the same in equity would bind the Board. Such a
promise was not contrary to any statutory provision but on
the contrary was in compliance with the directions issued
under Section 78-A of the Act. These new industries which
got attracted to this region relying upon the promise had
altered their position irretrievably. They had spent large
amounts of money for establishing the infrastructure, had
Page 71 of 114
entered into agreements with the Board for supply of
electricity and, therefore, had necessarily altered their
position relying on these representations thinking that they
would be assured of at least three years’ period
guaranteeing rebate of 10% on the total bill of electricity to
be consumed by them as infancy benefit so that they could
effectively compete with the old industries operating in the
field and their products could effectively compete with their
products. On these well-established facts the Board can
certainly be pinned down to its promise on the doctrine of
promissory estoppel.”
64. Similarly in Mahabir Vegetable Oils (P) Ltd. v. State of Haryana,
reported in (2006) 3 SCC 620 , the Apex Court Court observed that
“it is beyond any cavil that the doctrine of promissory estoppel
operates even in the legislative field”. This was in connection with a
statutory notification under the Haryana General Sales Tax Act.
65. In State of Punjab v. Nestle India Ltd., reported in (2004) 6
SCC 465, referring to the earlier precedents, the Apex Court held that
promissory estoppel long recognised as a legitimate defence in equity
was held to found a cause of action against the Government, even
when, and this needs to be emphasized, the representation sought to
be enforced was legally invalid in the sense that it was made in a
manner which was not in conformity with the procedure prescribed
by statute.
Page 72 of 114
66. The Apex Court went on to hold that the doctrine was not
limited only to cases where there was some contractual relationship
or other pre-existing legal relationship between the parties. The
principle would be applied even when the promise is intended to
create legal relations or affect a legal relationship which would arise
in future. The Government was held to be equally susceptible to the
operation of the doctrine in whatever area or field the promise is
made — contractual, administrative or statutory. To put it in the
words of the Court:
‘The law may, therefore, now be taken to be settled as a
result of this decision, that where the Government makes a
promise knowing or intending that it would be acted on by
the promisee 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 the
promisee, 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 299 of the
Constitution.
***
[E]quity will, in a given case where justice and fairness
demand, prevent a person from insisting on strict legal
rights, even where they arise, not under any contract, but
on his own title deeds or under statute.
Page 73 of 114
***
Whatever be the nature of the function which the
Government is discharging, the Government is subject to
the rule of promissory estoppel and if the essential
ingredients of this rule are satisfied, the Government can be
compelled to carry out the promise made by it. ”
The Apex Court distinguished its earlier decision in Kasinka
Trading v. Union of India, (1995) 1 SCC 274, by holding as under:
“40. The case of Kasinka Trading v. Union of India
[(1995) 1 SCC 274] cited by the appellant is an authority for
the proposition that the mere issuance of an exemption
notification under a provision in a fiscal statute such as
Section 25 of the Customs Act, 1962, could not create any
promissory estoppel because such an exemption by its very
nature is susceptible to being revoked or modified or
subjected to other conditions. In other words, there is no
unequivocal representation. The seeds of equivocation are
inherent in the power to grant exemption. Therefore, an
exemption notification can be revoked without falling foul of
the principle of promissory estoppel. It would not, in the
circumstances, be necessary for the Government to
establish an overriding equity in its favour to defeat the
petitioner’s plea of promissory estoppel. The Court also held
that the Government of India had justified the withdrawal of
exemption notification on relevant reasons in the public
interest. Incidentally, the Court also noticed the lack of
established prejudice to the promises when it said:
Page 74 of 114
‘The burden of customs duty, etc. is passed on to the
consumer and therefore the question of the appellants
being put to a huge loss is not understandable.'”
67. In State of Jharkhand vs. Brahmaputra Metallics Ltd., Civil
Appeal No. 3860-3862 of 2020, the Apex Court held that the State
authorities as well as its limbs covered by the sweep of Article 12 of
the Constitution of India being treated as ‘State’ within the meaning
of the said article, can be made subject to the equitable doctrine of
promissory estoppel in cases where because of their representation
the party claiming estoppel has changed its position and if such an
estoppel does not fly in the face of any statutory prohibition, absence
of power and authority of the promisor and is otherwise not opposed
to public interest, and also when equity in favour of the promisee
does not outweigh equity in favour of the promisor entitling the latter
to legally get out of the promise.
68. However, the law relating to promissory estoppels came up for
examination before the Apex Court on several occasions. The law
which was enunciated by the Judgment of Motilal Padampat (Supra).
The law enunciated by the Apex Court since Bakul Cashew Co. v.
STO [(1986) 2 SCC 365 : 1986 SCC (Tax) 385] and Motilal Padampat
(Supra) has reiterated the position clearly that for promissory
Page 75 of 114
estoppels to be made applicable against the Government, there are
three pre-conditions namely:
(1) there was a definitive representation by the Government;
(2) that the persons to whom the representation of promise
was made in fact altered their position by acting of upon such
representation of promise and
(3) that they suffered some prejudiced sufficient to constitute
an estoppels.
69. Although these essential pre-conditions are still considered to
be a good law. There have been certain other Judgments rendered
by the Apex Court where notwithstanding these three conditions
cited if the Government withdraws its earlier promise on public policy
of the public good then depending on the facts and circumstances of
such cases promissory estoppels may not apply to such cases.
70. In Shrijee Sales Corporation and Anr. Vs. Union of India ,
reported in (1997) 3 SCC 398, the Apex Court held that the principle
of promissory estoppel is applicable against the Government but in
case there is a supervening public equity, the Government would be
allowed to change its stand; it would then be able to withdraw from
representation made by it which induced persons to take certain
Page 76 of 114
steps which may have gone adverse to the interest of such persons
on account of such withdrawal. The Apex Court further held that
Once public interest is accepted as the superior equity which can
override individual equity, the aforesaid principle should be applicable
even in cases where a period has been indicated for the operation of
the promise. The Apex Court held that the Court must satisfy itself
that such a public interest exist and it has to determine whether the
Government should be held exempt from the liability of promise of
representation. The Apex Court went on to hold that the Government
is competent to resile from a promise even if there is no manifest
public interest involved provided, of course, no one is put in any
adverse situation which cannot be rectified. even where there is no
such overriding public interest, it may still be within the competence
of the Government to resile from the promise on giving reasonable
notice which need not be a formal notice, giving the promisee a
reasonable opportunity of resumption of his position, provided, of
course, it is possible for the promisee to restore the status quo ante.
If, however, the promisee cannot resume his position, the promise
would become final and irrevocable. The earlier precedent rendered
in Kasinka Trading (Supra) held that the earlier precedent is based
on correct analysis of facts and law and there is no reason defer
from the Judgment. The Apex Court on the facts of that case held
Page 77 of 114
that there was a super winning public interest and hence it should
not be mandatory for the Government to give notice before
withdrawing the exemption.
71. Besides the Kasinka Trading Vs. Union of India, reported in
(1995) 1 SCC 274 as have been discussed above, the Apex Court in
Shree Sidhbali Steel Ltd and Ors. Vs. State of Uttar Pradesh and ors,
reported in (2011) 3 SCC 193, held that where public interest
warrants principles of promissory estoppels cannot be invoked. The
Government can change policies in public interest and further the
doctrine of promissory estoppels cannot be invoked for enforcement
of a promise made contrary to law because none can be compelled
to act against the notifications which are in the nature of legislation.
The Apex Court held as under:
“32. The doctrine of promissory estoppel is by now well recognised
and well defined by a catena of decisions of this Court. Where the
Government makes a promise knowing or intending that it would be
acted on by the promisee 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 the promisee 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. The rule of promissory estoppel being an equitable
doctrine has to be moulded to suit the particular situation. It is not a
hard-and-fast rule but an elastic one, the objective of which is to do
justice between the parties and to extend an equitable treatment to
them. This doctrine is a principle evolved by equity, to avoid injustice
and though commonly named promissory estoppel, it is neither in the
realm of contract nor in the realm of estoppel. For application of thePage 78 of 114
doctrine of promissory estoppel the promisee must establish that he
suffered in detriment or altered his position by reliance on the
promise.
33. Normally, the doctrine of promissory estoppel is being applied
against the Government and defence based on executive necessity
would not be accepted by the court. However, if it can be shown by
the Government that having regard to the facts as they have
subsequently transpired, it would be inequitable to hold the
Government to the promise made by it, the court would not raise an
equity in favour of the promisee and enforce the promise against the
Government. Where public interest warrants, the principles of
promissory estoppel cannot be invoked. The Government can change
the policy in public interest. However, it is well settled that taking cue
from this doctrine, the authority cannot be compelled to do something
which is not allowed by law or prohibited by law. There is no
promissory estoppel against the settled proposition of law. Doctrine of
promissory estoppel cannot be invoked for enforcement of a promise
made contrary to law, because none can be compelled to act against
the statute. Thus, the Government or public authority cannot be
compelled to make a provision which is contrary to law.
35. A critical analysis of the abovequoted passage makes it evident
that the two-Judge Bench in Sant Steels case [(2008) 2 SCC 777] was
of the view that the notification issued under Section 49 of the Act of
1948 can be revoked/modified only if express provision was made for
the revocation/modification of the said notification under Section 49
itself and the Court found that as there was no such provision
contained in Section 49, it was not open to the Corporation to revoke
the same. Further, though the Court made reference to the General
Clauses Act, it added that the provisions of the General Clauses Act
would be applicable in case of delegated legislation if
withdrawal/curtailment of benefit was in larger public interest or if the
legislation was enacted by the legislature authorising the Government
to withdraw/curtail the benefit granted by a notification. Under the
circumstances the two notifications curtailing the benefit to 17% were
treated as contrary to Section 49 of the Act of 1948. On review of the
law on the subject and the relevant statutory provisions, this Court
finds that, for the reasons mentioned hereinafter, the above
statement of law is not an accurate proposition of law.
43. This Court finds that the proposition of law laid down by the two-
Judge Bench in the decision in Sant Steels case [(2008) 2 SCC 777]
mentioned above is too wide and has tendency to make Section 21 of
the General Clauses Act, 1897, inoperative. The concept of the largerPage 79 of 114
public interest introduced, before invocation of Section 21 of the
General Clauses Act, in fact, amounts to amendment of the said
provision, as Notifications dated 18-6-1998 and 25-1-1999, issued
under Section 49 of the Act of 1948, as well as Notification dated 7-8-
2000, issued under Section 24 of the Uttar Pradesh Electricity Reforms
Act, 1999, are in the nature of legislations and, therefore, the
principle of promissory estoppel would not apply to them.”
72. In Dai Ichi Karkaria Ltd Vs. Union of India & Ors , reported in
(2000) 4 SCC 57 referring to the earlier precedents in Kasinka
Trading (Supra) and Shrijee Sales Corporation (Supra), the Apex
Court held that the law in respect of promissory estoppels is well
settled and that even in respect of exemptions made by the
Government the doctrine of promissory estoppel will not be
applicable if the change in the stand of the Government is made on
account of public policy.
73. In Union of India & ors Vs. VVF Limited & Anr, reported in
(2020) 20 SCC 57, the Apex Court while dealing in a bunch of writ
petitions challenging the withdrawal of the benefits and incentives by
the Government held as under:
21.1. In Kasinka Trading [Kasinka Trading v. Union of India, (1995)
1 SCC 274] , in paras 12, 20 and 23, it is observed and held as follows
: (SCC pp. 283-84, 287 & 289)
“12. It has been settled by this Court that the doctrine of
promissory estoppel is applicable against the Government also
particularly where it is necessary to prevent fraud or manifest injustice.
The doctrine, however, cannot be pressed into aid to compel the
Government or the 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
Page 80 of 114
make’. There is preponderance of judicial opinion that to invoke the
doctrine of promissory estoppel clear, sound and positive foundation
must be laid in the petition itself by the party invoking the doctrine and
that bald expressions, without any supporting material, to the effect
that the doctrine is attracted because the party invoking the doctrine
has altered its position relying on the assurance of the Government
would not be sufficient to press into aid the doctrine. In our opinion,
the doctrine of promissory estoppel cannot be invoked in the abstract
and the courts are bound to consider all aspects including the results
sought to be achieved and the public good at large, because while
considering the applicability of the doctrine, the courts have to do
equity and the fundamental principles of equity must for ever be
present to the mind of the court, while considering the applicability of
the doctrine. The doctrine must yield when the equity so demands if it
can be shown having regard to the facts and circumstances of the case
that it would be inequitable to hold the Government or the public
authority to its promise, assurance or representation.
***
20. The facts of the appeals before us are not analogous to the
facts in Anglo Afghan Agencie [Union of India v. Anglo Afghan
Agencies, (1968) 2 SCR 366 : AIR 1968 SC 718] or M.P. Sugar
Mills [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2
SCC 409 : 1979 SCC (Tax) 144] . In the first case the petitioner therein
had acted upon the unequivocal promises held out to it and exported
goods on the specific assurance given to it and it was in that fact
situation that it was held that Textile Commissioner who had
enunciated the scheme was bound by the assurance thereof and
obliged to carry out the promise made thereunder. As already noticed,
in the present batch of cases neither the notification is of an executive
character nor does it represent a scheme designed to achieve a
particular purpose. It was a notification issued in public interest and
again withdrawn in public interest. So far as the second case (M.P.
Sugar Mills case [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.,
(1979) 2 SCC 409 : 1979 SCC (Tax) 144] ) is concerned the facts were
totally different. In the correspondence exchanged between the State
and the petitioners therein it was held out to the petitioners that the
industry would be exempted from sales tax for a particular number of
initial years but when the State sought to levy the sales tax it was held
by this Court that it was precluded from doing so because of the
categorical representation made by it to the petitioners through letters
in writing, who had relied upon the same and set up the industry.
***
23. The appellants appear to be under the impression that even if,
in the altered market conditions the continuance of the exemption may
Page 81 of 114
not have been justified, yet, Government was bound to continue it to
give extra profit to them. That certainly was not the object with which
the notification had been issued. The withdrawal of exemption “in
public interest” is a matter of policy and the courts would not bind the
Government to its policy decisions for all times to come, irrespective of
the satisfaction of the Government that a change in the policy was
necessary in “public interest”. The courts, do not interfere with the
fiscal policy where the Government acts in “public interest” and neither
any fraud or lack of bona fides is alleged much less established. The
Government has to be left free to determine the priorities in the matter
of utilisation of finances and to act in the public interest while issuing
or modifying or withdrawing an exemption notification under Section
25(1) of the Act.”
Thus, it can be seen that this Court has specifically and clearly held
that the doctrine of promissory estoppel cannot be invoked in the
abstract and the courts are bound to consider all aspects including the
objective to be achieved and the public good at large. It has been held
that while considering the applicability of the doctrine, the courts have
to do equity and the fundamental principles of equity must forever be
present to the mind of the court, while considering the applicability of
the doctrine. It is further held that the doctrine must yield when the
equity so demands if it can be shown having regard to the facts and
circumstances of the case that it would be inequitable to hold the
Government or the public authority to its promise, assurance or
representation. It is further held that an exemption notification does
not make items which are subject to levy of customs duty, etc. as items
not leviable to such duty. It only suspends the levy and collection of
customs duty, etc. wholly or partially and subject to such conditions as
may be laid down in the notification by the Government in “public
interest”. Such an exemption by its very nature is susceptible of being
revoked or modified or subjected to other conditions. The supersession
or revocation of an exemption notification in “public interest” is an
exercise of the statutory power of the State under the law itself. It has
been further held that under the General Clauses Act an authority
which has the power to issue a notification has the undoubted power to
rescind or modify the notification in a like manner. It has been
observed that the withdrawal of exemption “in public interest” is a
matter of policy and the courts would not bind the Government to its
policy decisions for all times to come, irrespective of the satisfaction of
the Government that a change in the policy was necessary in “public
interest”. It has been held that where the Government acts in “public
interest” and neither any fraud or lack of bona fides is alleged, much
less established, it would not be appropriate for the court to interfere
with the same.
Page 82 of 114
21.2. In Shrijee Sales Corpn. [Shrijee Sales Corpn. v. Union of India,
(1997) 3 SCC 398] , it is observed and held that the principle of
promissory estoppel may be applicable against the Government. But
the determination of applicability of promissory estoppel against public
authority/Government hinges upon balance of equity or “public
interest”. In case there is a supervening public interest, the
Government would be allowed to change its stand; it would then be
able to withdraw from representation made by it which induced
persons to take certain steps which may have gone adverse to the
interest of such persons on account of such withdrawal. Once public
interest is accepted as the superior equity which can override individual
equity, the aforesaid principle should be applicable even in cases where
a period has been indicated for operation of the promise.
21.3. In Shree Durga Oil Mills [STO v. Shree Durga Oil Mills, (1998) 1
SCC 572] , it has been held that when the withdrawal of exemption is
in public interest, the public interest must override any consideration of
private loss or gain. In the said case, the change in policy and
withdrawal of the exemption on the ground of severe resource crunch
have been found to be a valid ground and to be in public interest.
21.4. In Mahaveer Oil Industries [State of Rajasthan v. Mahaveer Oil
Industries, (1999) 4 SCC 357] , after considering the decision of this
Court in Kasinka Trading [Kasinka Trading v. Union of India, (1995) 1
SCC 274] , a similar view has been taken and it has been observed that
public interest requires that the State be held bound by the promise
held out by it in such a situation. But this does not preclude the State
from withdrawing the benefit prospectively even during the period of
the Scheme, if public interest so requires. Even in a case where a party
has acted on the promise, if there is any supervening public interest
which requires that the benefit be withdrawn or the scheme be
modified, that supervening public interest would prevail over any
promissory estoppel.
74. The Apex Court while examining the challenges to the
discontinuation of the incentives issued by withdrawing a notification
which was earlier issued under the appropriate provisions of CGST
Act reiterated the position of law in so far as promissory estoppels is
concerned, it was held that the Supreme Court has consistently held
that where an exemption granted earlier is withdrawn by subsequent
Page 83 of 114
notification based in a change in policy even in such cases the
doctrine of promissory estoppel could not be invoked. It has been
consistently held that where the change of policy is in larger public
interest, the State cannot be prevented from withdrawing an
incentive which it had granted to an earlier notification. It was held
that even in cases where the exemption was upto a particular period,
the same can also be withdrawn by the State if it is found that such
withdrawal is in public interest. Where larger public interest outweigh
the individual interest, the doctrine of promissory estoppel cannot be
invoked to compel the State not to resile from its promise if the
action of the State is found to be in public interest. It was further
held that even on the ground of change of policy which is in public
interest or in view of the change of the statutory regime itself on
account of GST Act being introduced in the instant case, it will not be
correct to hold the Union bound by representation made by
Notification as the same is found to be contrary to the statutory
provisions as enacted under Section 174 (2)(c) of the CGST Act.
75. Coming to the facts of the present proceedings, there is no
doubt that the benefits under the Industrial Policy of 2008 was
sought to be given effect to by the Scheme of Assam Industrial (Tax
Exemption) Scheme 2009. The scheme itself makes it very clear that
Page 84 of 114
these benefits for exemption of VAT is till the currency of the VAT
Act. Subsequent to the GST regime, the Assam Industries (Tax
Reimbursement for Eligible Units) Scheme 2017 was introduced for
extension of the period for granting customized tax incentives under
the Industrial Policy of 2008 although only in respect of the States
share of the GST paid by such industries. The Industrial Policy of
2008 was a policy announced by the Government of Assam and not
by the Central Government. In so far as the State of Assam is
Concerned, it can only make a representation or a promise in respect
of the incentives to be granted by the State of Assam. Post GST
regime, the manner of tax imposition and collection of tax underwent
complete change. Under the GST regime, the imposition of Tax on
Goods and Services rendered has two components namely the
State’s share and the Central Share. Therefore, it cannot be said that
the State resiled from its earlier promise of grant of incentives. By
the Tax reimbursement Scheme of 2017, the earlier scheme for
reimbursement for giving effect to the benefits under the Industrial
Policy was suitably amended to continue to grant the benefits to the
eligible industries who are paying taxes under the GST regime. But
such incentives can only be granted from the State’s share of GST
collected. The State cannot hand out a promise to say that the
Central Share of GST paid by any such industries shall also be
Page 85 of 114
reimbursed by the State when such share of taxes does not go to the
State exchequer. Under such circumstances, the continuation of the
incentives of tax exemption under the Tax Reimbursement Scheme
of 2017 to the extent of the State share of GST collected must be
accepted to be due and substantial performance of the State’s
obligation towards the promise earlier made to such industries and
units. The contention of the petitioners that under the Industrial
Policy of 2008, the promise of 100% VAT exemption and which came
to be implemented by the Tax Exemption Scheme of 2009 must be
continued to be extended even under the GST regime to include the
Central Share of GST paid by the industries/units of the petitioners in
view of the earlier promise or representation made under the
Industrial Policy of 2008 read with the erstwhile Tax Remission
Scheme of 2009 and failure to do so as hit by the doctrine of
promissory estoppels. Such contention of the writ petitioners cannot
be accepted and are therefore rejected. After the change in the ex
Regime and enactment of the GST Statute, there can be no
mandamus issued to the State Government to reimburse the Central
share of GST collected merely because 100% VAT exemption was
assured under the Industrial Policy of 2008 read with the Tax
Reimbursement Scheme of 2009.
Page 86 of 114
76. The Change of Tax regime by incorporation of the GST by the
Central and the State Government is by way of the proper legislation
and therefore has to be accepted to be in public policy. Under such
circumstances, the claim of the petitioner for invocation of doctrine
of promissory estoppel for reimbursement of the entire amount of
GST paid by the petitioner including the Central share for being
refunded by the State cannot be accepted as the same would be
contrary to the statute itself and such contention therefore rejected.
77. There is another reason why such contention cannot be
accepted and no mandamus can be issued inasmuch as the State in
its Industrial Policy of 2008 read with the Tax Reimbursement
Scheme of 2009 only gave the assurance of reimbursement of VAT
paid under the Assam VAT Act, 2003 as the said legislation was in
force at that relevant point in time. Subsequently, across the country,
the Central GST and the State GST legislations have been enacted
and enforced with effect from 01.07.2017. All other taxes including
state sales tax, central sales tax, central excise etc were subsumed in
the GST. Under such circumstances, State cannot be compelled to
continue to extend the benefit of 100% VAT exemption when with
effect from 01.07.2017 the various State taxes including VAT came
to be subsumed under the State GST. Therefore the State while
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continuing to extend its benefit of exemption notified the Assam
Reimbursement Scheme of 2017 to give benefits to such industries
for any residual period in respect of GST paid to the State
exchequer. Therefore, the contention of the petitioners that such
action of the respondent department in not reimbursing the benefit
of taxes paid to the extent of 100% including the share of Central
GST cannot be accepted and the same is therefore rejected.
78. In order to examine the contentions of the petitioners that their
applications seeking extension of the benefit was filed well prior to
the date of notification of the Assam Industries (Tax Reimbursement
for Eligible Units) (Amendment) Scheme 2020 and therefore the
same ought not to have been kept pending in view of the effective
order being passed extending the period of benefit in respect of
other similarly situated units or industries and such inaction on the
part of the respondents has the effect of negating the lawful rights
that had accrued to the petitioner in view of the promise of the
representations made under the Industrial Policy of 2008 read with
Assam Industries (Tax Exemption) Scheme 2009. It will be necessary
to first explore whether any accrued or vested right of the petitioner
was in existence which has been denied the petitioner. The word
‘Vest’ is normally used when an immediate fixed right in present or
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future enjoyment in respect of a property is created with the long
usage the said vest has also acquired a meaning as “absolute or
indivisible right”. In so far the claim of the present petitioners is
concerned, the reference to the term “vested or accrued rights” is
not in respect of the property but the same expression was used to
refer to ‘legitimate’ or ‘settle expectation’ to which the petitioners’
claimed that they were entitled to by virtue of the representation of
the promise handed out by the Government. According to the
petitioners it was their legitimate expectation to be extended the
benefit of tax exemption which they claimed to have been entitled to
by virtue of the industrial and Investment Policy 2008 read with
Assam Industries (Tax Exemption) Scheme, 2009. The claim of the
petitioners are that notwithstanding the introduction of the GST
regime once a promises made by the Government and based on that
representation, the petitioners have changed their stand to their
detriment by setting up the industry and making huge investment,
notwithstanding the introduction of GST regime, the promise handed
out by the Government for tax exemption will have to be accepted to
a right accrued or vested against the Government for grant of the
said benefit of tax exemption. However, such contention raised by
the petitioners cannot be accepted on two counts. First, as have
been discussed elaborately above, there can be no promissory
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estoppels against the statute. The law enunciated by this Court by
several judgments has made the position very clear to the effect that
the Government can alter its position or resile from his promise
earlier made in view of any public policy. The Apex Court has even
held that the Government can resile from its promise earlier made
even if there is no public policy, if the situation requires that the
Government has to alter its position. In the facts of the present case,
the industrial policy read with the tax exemption scheme 2009 was
brought into effect at the time when the Value Added Tax regime
was in force. However, with effect from 01.07.2017, the GST regime
replace the then existing system of taxation prevalent subsuming
various taxes including sales tax, VAT and Central Excise into GST.
The nature of taxation on products also underwent a complete
change with the advent of GST regime. Earlier the situs of sale was
the basis for imposition of tax under the VAT regime. However,
under the GST regime, the component of tax deducted between the
State and the Centre. Therefore pursuant to the GST regime
notwithstanding the share of taxes paid to the Central Exchequers, it
is seen that the State continued to extend its promise by remission of
taxes of the State share collected as GST by notifying the Assam
Industries (Tax reimbursement for eligible units) Scheme 2017. As
such it cannot be said that till the notification of 30.12.2020
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amending the Assam Industries (Tax reimbursement for eligible
units) Scheme 2017 the State Government had resile from its
position to reimburse its share of taxes collected as have been
envisaged under the Industrial Policy of 2008. The subsequent
Notification amending the scheme of 2017 by Notification dated
30.12.2020 whereby the power of grant of extension of the period of
exemption by the Finance Department was taken away also cannot
be faulted with as it is a policy decision taken by the Government in
view of the introduction of the GST regime. Such alteration of the
promise of the representation by the Government will have to be
tested on the touchstone of malice as may be projected by the
petitioners. However, no specific allegation or malice is found in the
pleadings to have been urged by the petitioner to question the
withdrawal of extension of entitlement of exemption by the
subsequent impugned Notification dated 30.12.2020.
79. However, there is still one aspect which need to be examined
which is whether the case of the petitioners not being considered by
the respondent authorities for extension of the period of entitlement
of tax exemption was violative of Article 14 when similar situated
industries/units were shown to have been given benefit prior to the
impugned Notification dated 30.12.2020. The respondents have
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sought to defend their actions by projecting that the benefits given
to such other similarly situated industries or units by excluding the
petitioners was done on a valid classification. In Budhan Choudhury
Vs. State of Bihar, reported in AIR 1955 SC 191, the question came
up before the Apex Court regarding the ambit of Article 14. The
Apex Court held that it is now well established that while Article 14
forbids class legislation, it does not forbid reasonable classification
for the purposes of legislation. In order, however, to pass the test of
permissible classification two conditions must be fulfilled, namely, (i)
that the classification must be founded on an intelligible differentia
which distinguishes persons or things that are grouped together from
others left out of the group, and (ii) that that differentia must have a
rational relation to the object sought to be achieved by the statute in
question. The classification may be founded on different bases;
namely, geographical, or according to objects or occupations or the
like. What is necessary is that there must be a nexus between the
basis of classification and the object of the Act under consideration.
It is also well established by the decisions of this Court that Article 14
condemns discrimination not only by a substantive law but also by a
law of procedure.
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80. Again in Ram Krishna Dalmia vs. SR Tendolkar, AIR 1958
SC 538, the Constitution Bench of the Apex Court culled out the
following principles:
“11. … (a) that a law may be constitutional even though it
relates to a single individual if, on account of some special
circumstances or reasons applicable to him and not
applicable to others, that single individual may be treated as
a class by himself;
(b) that there is always a presumption in favour of the
constitutionality of an enactment and the burden is upon
him who attacks it to show that there has been a clear
transgression of the constitutional principles;
(c) that it must be presumed that the legislature
understands and correctly appreciates the need of its own
people, that its laws are directed to problems made
manifest by experience and that its discriminations are
based on adequate grounds;
(d) that the legislature is free to recognise degrees of harm
and may confine its restrictions to those cases where the
need is deemed to be the clearest;
(e) that in order to sustain the presumption of
constitutionality the court may take into consideration
matters of common knowledge, matters of common report,
the history of the times and may assume every state of
facts which can be conceived existing at the time of
legislation; andPage 93 of 114
(f) that while good faith and knowledge of the existing
conditions on the part of a legislature are to be presumed, if
there is nothing on the face of the law or the surrounding
circumstances brought to the notice of the court on which
the classification may reasonably be regarded as based, the
presumption of constitutionality cannot be carried to the
extent of always holding that there must be some
undisclosed and unknown reasons for subjecting certain
individuals or corporations to hostile or discriminating
legislation.”
81. In Nagpur Improvement Trust vs. Vithal Rao, (1973) 1
SCC 500, another Constitution Bench of the Apex Court had the
occasion to consider the test of reasonableness under Article 14 of
the Constitution of India. It was held by the Apex Court that the
State can make a reasonable classification for the purpose of
legislation [and] that the classification in order to be reasonable must
satisfy two tests: (i) the classification must be founded on intelligible
differentia, and (ii) the differentia must have a rational relation with
the object sought to be achieved by the legislation in question. The
Court emphasised that in this regard object itself should be lawful
and it cannot be discriminatory. If the object is to discriminate
against one section of the minority, the discrimination cannot be
justified on the ground that there is a reasonable classification
because it has rational relation to the object sought to be achieved.
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It was held by the Apex Court that the principle underlying the
guarantee of Article 14 is not that the same rules of law should be
applicable to all persons within the Indian territory or that the same
remedies should be made available to them irrespective of
differences of circumstances. It only means that all persons similarly
circumstanced shall be treated alike both in privileges conferred and
liabilities imposed. Equal laws would have to be applied to all in the
same situation, and there should be no discrimination between one
person and another if as regards the subject-matter of the legislation
their position is substantially the same.
82. In E.P. Toyappa Vs. State of T. N, reported in (1974) 4 SCC 3,
the Apex Court held that the basic principle which conforms both
Article 14 and 16 are equality and inhibition against discrimination.
The Apex Court held that from a positivistic point of view, equality is
antithetic to arbitrariness. In fact equality and arbitrariness are sworn
enemies; one belongs to the rule of law in a republic while the other,
to the whim and caprice of an absolute monarch. Where an act is
arbitrary, it is implicit in it that it is unequal both according to political
logic and constitutional law and is therefore violative of Article 14,
and if it affects any matter relating to public employment, it is also
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violative of Article 16. Articles 14 and 16 strike at arbitrariness in
State action and ensure fairness and equality of treatment.
83. In State of UP Vs. Deepak Fertilizers & Petrochemical Corp. Ltd.
reported in (2007) 10 SCC 342, the Apex Court held that the
reasonableness of this classification must be examined on the basis,
that when the object of the taxing provision is not to tax the sale of
certain chemical fertilizers included in the list, which clearly points
out that all the fertilizers with the similar compositions must be
included without excluding any other chemical fertilizer which has the
same elements and compositions. Thus, there is no reasonable nexus
of such classification among various chemical fertilisers of the same
class by the State. This Court in Ayurveda Pharmacy [(1989) 2 SCC
285 : 1989 SCC (Tax) 273] held that two items of the same category
cannot be discriminated and where such a distinction is made
between items falling in the same category it should be done on a
reasonable basis, in order to save such a classification being in
contravention of Article 14 of the Constitution of India.
84. In D.S. Nakara Vs. Union of India, reported in (1983) 1 SCC
305, the Constitution Bench of the Apex Court while considering the
scope, content and meaning of Article 14 held that thus the
fundamental principle is that Article 14 forbids class legislation but
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permits reasonable classification for the purpose of legislation which
classification must satisfy the twin tests of classification being
founded on an intelligible differentia which distinguishes persons or
things that are grouped together from those that are left out of the
group and that differentia must have a rational nexus to the object
sought to be achieved by the statute in question.
85. In Ayurveda Pharmacy Vs. State of Tamil Nadu, reported in
(1989) 2 SCC 285, the Apex Court held that two items of the same
category cannot be discriminated and where such a distinction is
made between items falling in the same category it should be done
on a reasonable basis, in order to save such a classification being in
contravention of Article 14 of the Constitution of India.
86. The principles of examining the validity of a legislation under
Article 14 of the Constitution was yet again considered by the Apex
Court in Amarendra Kumar Mohapatra Vs. State of Orissa, reported
in (2014) 4 SCC 583, the Apex Court held that the approach to be
adopted and the principles applicable to any forensic exercise aimed
at examining the validity of a legislation on the touchstone of Article
14 of the Constitution have been long since settled by several
decisions of this Court. Restatement or repetition of those principles
was, therefore, considered platitudinous. The real difficulty as often
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acknowledged by this Court lies not in stating the principles
applicable but in applying them to varying fact situations that come
up for consideration. Trite it is to say at the outset that a piece of
legislation carries with it a presumption of constitutional validity. Also
settled by now is the principle that Article 14 does not forbid
reasonable classification. A classification is valid on the anvil of Article
14, if the same is reasonable that is it is based on a reasonable and
rational differentia and has a nexus with the object sought to be
achieved. These principles have again been summarized by the Apex
Court in Re: (1979) 1 SCC 380. These principles have been
summarized by the Apex Court as under:
“(1) ***
(2) The State, in the exercise of its governmental power,
has of necessity to make laws operating differently on
different groups or classes of persons within its territory to
attain particular ends in giving effect to its policies, and it
must possess for that purpose large powers of
distinguishing and classifying persons or things to be
subjected to such laws.
(3) The constitutional command to the State to afford equal
protection of its laws sets a goal not attainable by the
invention and application of a precise formula. Therefore,
classification need not be constituted by an exact or
scientific exclusion or inclusion of persons or things. The
courts should not insist on delusive exactness or applyPage 98 of 114
doctrinaire tests for determining the validity of classification
in any given case. Classification is justified if it is not
palpably arbitrary.
(4) The principle underlying the guarantee of Article 14 is
not that the same rules of law should be applicable to all
persons within the Indian territory or that the same
remedies should be made available to them irrespective of
differences of circumstances. It only means that all persons
similarly circumstanced shall be treated alike both in
privileges conferred and liabilities imposed. Equal laws
would have to be applied to all in the same situation, and
there should be no discrimination between one person and
another if as regards the subject-matter of the legislation
their position is substantially the same.
(5) By the process of classification, the State has the power
of determining who should be regarded as a class for
purposes of legislation and in relation to a law enacted on a
particular subject. This power, no doubt, in some degree is
likely to produce some inequality; but if a law deals with the
liberties of a number of well-defined classes, it is not open
to the charge of denial of equal protection on the ground
that it has no application to other persons. Classification
thus means segregation in classes which have a systematic
relation, usually found in common properties and
characteristics. It postulates a rational basis and does not
mean herding together of certain persons and classes
arbitrarily.
(6) The law can make and set apart the classes according to
the needs and exigencies of the society and as suggested
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by experience. It can recognise even degree of evil, but the
classification should never be arbitrary, artificial or evasive.
(7) The classification must not be arbitrary but must be
rational, that is to say, it must not only be based on some
qualities or characteristics which are to be found in all the
persons grouped together and not in others who are left out
but those qualities or characteristics must have a
reasonable relation to the object of the legislation. In order
to pass the test, two conditions must be fulfilled, namely,
(1) that the classification must be founded on an intelligible
differentia which distinguishes those that are grouped
together from others and (2) that that differentia must have
a rational relation to the object sought to be achieved by
the Act.
(8) The differentia which is the basis of the classification
and the object of the Act are distinct things and what is
necessary is that there must be a nexus between them. In
short, while Article 14 forbids class discrimination by
conferring privileges or imposing liabilities upon persons
arbitrarily selected out of a large number of other persons
similarly situated in relation to the privileges sought to be
conferred or the liabilities proposed to be imposed, it does
not forbid classification for the purpose of legislation,
provided such classification is not arbitrary in the sense
abovementioned.
***
(11) Classification necessarily implies the making of a
distinction or discrimination between persons classified and
those who are not members of that class. It is the essence
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of a classification that upon the class are cast duties and
burdens different from those resting upon the general
public. Indeed, the very idea of classification is that of
inequality, so that it goes without saying that the mere fact
of inequality in no manner determines the matter of
constitutionality.”
87. In Subramanian Swamy Vs. Director, CBI, reported in (2014) 8
SCC 682, the Apex Court laid down the parameters under which a
law can be challenged to be violative of Article 14. The Apex Court
held therein that where there is challenge to the constitutional
validity of a law enacted by the legislature, the Court must keep in
view that there is always a presumption of constitutionality of an
enactment, and a clear transgression of constitutional principles must
be shown. The fundamental nature and importance of the legislative
process needs to be recognised by the Court and due regard and
deference must be accorded to the legislative process. Where the
legislation is sought to be challenged as being unconstitutional and
violative of Article 14 of the Constitution, the Court must remind itself
to the principles relating to the applicability of Article 14 in relation to
invalidation of legislation. The two dimensions of Article 14 in its
application to legislation and rendering legislation invalid are now
well recognised and these are: (i) discrimination, based on an
impermissible or invalid classification, and (ii) excessive delegation of
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powers; conferment of uncanalised and unguided powers on the
executive, whether in the form of delegated legislation or by way of
conferment of authority to pass administrative orders–if such
conferment is without any guidance, control or checks, it is violative
of Article 14 of the Constitution. The Court also needs to be mindful
that a legislation does not become unconstitutional merely because
there is another view or because another method may be considered
to be as good or even more effective, like any issue of social, or even
economic policy. It is well settled that the courts do not substitute
their views on what the policy is.
The Apex Court further held that the Constitution permits the
State to determine, by the process of classification, what should be
regarded as a class for purposes of legislation and in relation to law
enacted on a particular subject. There is bound to be some degree of
inequality when there is segregation of one class from the other.
However, such segregation must be rational and not artificial or
evasive. In other words, the classification must not only be based on
some qualities or characteristics, which are to be found in all persons
grouped together and not in others who are left out but those
qualities or characteristics must have a reasonable relation to the
object of the legislation. Differentia which is the basis of classification
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must be sound and must have reasonable relation to the object of
the legislation. If the object itself is discriminatory, then explanation
that classification is reasonable having rational relation to the object
sought to be achieved is immaterial.
88. In Union of India Vs. N.S Rathnam and Sons, reported in
(2015) 10 SCC 681, the Apex Court while examining the validity of
two excise notifications whereby the role of duly of excise was
exempted in respect of iron and steel scrap obtained by breaking the
ship subject to the condition that customs duty should have been
levied at Rs. 1400 per light displacement tonnage (LDT). The Apex
Court held that in the field of taxation, the legislature has an
extremely wide discretion to classify items for tax purposes, so long
as it refrains from clear and hostile discrimination against particular
persons or classes (see State of Madras v. P.R. Sriramulu [(1996) 1
SCC 345] ). However, at the same time, when a substantive
unreasonableness is to be found in a taxing statute/notification, it
may have to be declared unconstitutional. Although the Court may
not go into the question of a hardship which may be occasioned to
the taxpayers but where a fair procedure has not been laid down,
the validity thereof cannot be upheld. A statute which provides for
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civil or evil consequences must conform to the test of
reasonableness, fairness and non-arbitrariness.
89. Having examined all these Judgments and law enunciated by
the Apex Court, it is clear that Article 14 does not bar classification.
However, the said classification must be on an inteligible differentia
and on a reasonable basis which supports the purpose for which the
classifications have been sought to be made.
90. In Navtej Singh Johar & Ors. Vs. Union of India, reported in
(2018) 10 SCC 1 where the constitutionality of a law is assailed on
the ground of violation of fundamental rights, the tests is to see
whether the effect or the operation of law infringes on the
fundamental rights. The intention of the legislature is not
determinative to decide on the said issue. The Apex Court while
deciding the matter held that the Court has to see is whether
constitutional provisions have been transgressed and if so, as a
natural corollary, the death knell of the challenged provision must
follow. It was further held that when the constitutionality of a law is
challenged on the ground that it violates the guarantees in Part III of
the Constitution, what is determinative is its effect on the
infringement of fundamental rights. [Kerala Education Bill, 1957, In
re, AIR 1958 SC 956 at para 26; Sakal Papers (P) Ltd. v. Union of
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India, AIR 1962 SC 305 at para 42; Rustom Cavasjee
Cooper v. Union of India, (1970) 1 SCC 248 at paras 43, 49; Bennett
Coleman and Co. v. Union of India, (1972) 2 SCC 788 at para
39; Maneka Gandhi v. Union of India, (1978) 1 SCC 248 at para 19.]
This affords the guaranteed freedoms their true potential against a
claim by the State that the infringement of the right was not the
object of the provision. It is not the object of the law which impairs
the rights of the citizens. Nor is the form of the action taken
determinative of the protection that can be claimed. It is the effect of
the law upon the fundamental right which calls the courts to step in
and remedy the violation. The individual is aggrieved because the
law hurts. The loss suffered by the individual is measured by the
violation of a protected right. Hence, while assessing whether a law
infringes a fundamental right, it is not the intention of the lawmaker
that is determinative, but whether the effect or operation of the law
infringes fundamental rights.
91. The notification dated 30.12.2019, whereby the Government
notified the Assam Industries (Tax Reimbursement for Eligible Units)
(Amendment) Scheme, 2020 reflects the policy decision taken by the
Government. The Respondents have taken a stand that this is the
policy adopted by the Government in view of the financial hardships
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which has been faced by the Government for various reasons. There
is no gain saying that constitutional courts in exercise of the powers
of judicial review can interfere with statutes or Rules or even
schemes if the same are found to be unconstitutional. However, the
Courts, while exercising judicial power, do not ordinarily interfere
with policy decisions of the Executive unless the policy decision can
be faulted on grounds of malefide, unreasonableness or arbitrariness
or unfairness, etc.
92. Arbitrariness, irrationality, perversity, or if it is otherwise
opposed to public policy or in conflict with any constitutional
provision, will definitely render such policy unconstitutional.
However, such policy cannot be faulted only on the ground that the
policy affects the business interests of a party. Such argument will
not justify invalidating any policy in matters of taxation or economic
regulations. The courts are not expected to express their opinion as
to whether at any particular point in time or any given situation, any
such policy should have been adopted or not. It is best left to the
discretion of the State. Reference in this context can be made to the
Judgment of the Apex Court rendered in Ugar Sugar Works Limited
Vs Delhi Administration Ltd, reported in (2013) SCC 635.
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93. Ordinarily there is always a presumption for constitutionality of
a law enacted by the legislature. When there is a challenge to the
constitutionality of the law by the legislation or any Rule by the
Executive, there must be a clear projection brought out before the
court that there is a transgression of the constitutional principles.
When the legislation is sought to be challenged as being
unconstitutional and violative of Article 14 of the Constitution, the
principles relating to applicability of Article 14 in relation to
invalidation of a legislation has to be borne in mind. For a legislation
to be struck down as invalid and being in violation of Article 14 it can
be done on two grounds, namely (i) discrimination based on an
impermissible or invalid classification and (ii) excessive delegation of
powers conferment of uncannalized and unguided powers on the
Executive, whether in the form of delegated legislation or by way of
conferment authority to pass administrative orders. If such
conferment is without any guidance, control or check, it is violative of
Article 14 of the Constitution. It must also be borne in mind that
legislation does not become unconstitutional merely because there is
another view that may be adopted or because another method or
procedure may be considered to be better and more effective
manner of addressing the issue by framing more appropriate
economic or social policies. It must be remembered that the courts
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will not substitute their views on what such policies should be. It is
best left to the discretion of the government.
94. Under such circumstances where resiling from a promise earlier
made by the Government is pursuant to legislative changes brought
about by enacting a new statute and as an natural corollary thereof,
the exemption offered to the units or industries like the petitioners
came to be restricted to the extent of the collection of tax by way of
GST to the extent of the share of the State, such action of the
respondents, therefore, cannot be faulted with to come to the
conclusion that such change in the position subsequent to promises
made is hit by the doctrine of promissory estoppel and that thereby
the petitioners have been deprived of any legitimate expectation
and/or any accrued or vested rights in favour of the writ petitioners.
The challenge made to the legality of the Assam Industries (Tax
Reimbursement for eligible Units) Scheme 2020 (Amenment)
therefore cannot be sustained and must fail.
95. However, It is seen that the claim of the petitioners seeking
extension of the period of exemption were never considered by the
State respondents inspite of specific representations submitted by
the petitioners while similar representations preferred by other units
or industries were considered and the benefits of extension was
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granted. One such order passed in case of one Varun Beverages Ltd.
is enclosed to the writ petition itself. The only explanation offered by
the State is that it was based on a reasonable classification and the
claims of the petitioners were not considered because of financial
crunch and by that time the amendment to the scheme of 2017 was
notified by the notification impugned dated 31.12.2020. Such bald
explanation that consideration of other similarly situated units to the
exclusion of the writ petitioners are based on reasonable
classification cannot be accepted unless the specific reasons are
placed before the Court.
96. In the facts of the present case, the case projected by the
petitioners is that the Amendment to the reimbursement scheme of
2020 by which the powers conferred on the finance department to
grant extension of benefits has been taken away is premised on the
ground of violation of the doctrine of promissory estoppel and
legitimate expectation. In the discussions above, it has been
explained that this departure of the government from its earlier
promise handed out, is by virtue of a change in the taxation regime
brought in by way of the GST statute with effect from 01.07.2017.
The earlier taxation laws including the manner and procedure for
imposition and collection of taxation was completely overhauled
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under the GST and these taxes be it the state sales tax or the central
sales tax or the Value Added Tax or the Service Tax etc, all came to
be subsumed into the GST. Therefore, such alteration on the basis of
the earlier promise handed out by the government under the
Industrial Policy of 2008 came to be effected because of the change
in the law. It is well settled that change in law is in furtherance of
public policy. The challenge to the amendments brought in by the
impugned Notification dated 30.12.2019 to the Assam Industries
(Tax Reimbursement for Eligible Units) Scheme, 2017 has been
assailed on the ground of violation of Article 14 as it is contended
that the government has resorted to unreasonable classification by
which the petitioners’ have been ignored while other similarly
situated units have been given due benefit. It is also settled that
where a vires of a statute is under challenge, courts must adopt
every possibility to arrive at an interpretation that will not render the
legislation otiose or unconstitutional.
97. In the context of the present proceedings, what is ultimately
seen is that the grievance of the petitioner essentially is that their
cases prior to the impugned amendment dated 30.12.2019 was not
examined as have been done in the cases of other similarly situated
units or industries. The petitioners had filed their applications seeking
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extension of the period of exemption well prior to the impugned
notification. There is no explanation by the respondents as to why
the application was not considered and appropriate orders were
passed. Such non consideration of the claim of the petitioners has
not been justified by the respondent authority while considering the
claims of other similarly situated units or industries like that Varun
Beverages save and accept that the decision of the government to
accept the findings to consider the application by Varun Beverages
was based on reasonable classification. On what basis this
classification was arrived at, is not placed before the court by the
respondents. Mere reference to a reasonable classification without
demonstrating as to how the classification has been resorted to will
not permit the respondents to escape from the rigors prescribed
under Article 14 when any classification is made for exclusion of
similarly situated parties.
98. From the pleadings it is seen that the order passed in favour of
“Varun Beverages” came to be issued on 09.11.2020 which is much
later than the dates on which the representations were preferred by
the petitioners. Unless the respondents are able to sustain such
classification on the basis of justified reasons which are germane to
the objectives sought to be achieved, such explanation cannot be
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accepted to be fair and proper justifying non-consideration of the
claims of the present petitioners which were admittedly filed well
prior to the impugned notification. Such action therefore cannot be
accepted to be within the parameters specified under Article 14. No
materials have been placed before the Court to show that the said
“Varun Beverages” was differently placed then the present writ
petitioners and therefore any classification was called for. The
Judgment of Seema Silk and Sarees (Supra) relied upon by the writ
petitioner in support of their contention, therefore does not come to
their aid. The respondents are duty bound to apply the same
yardstick to the petitioners as has been done in cases of other
similarly situated industries or units. The respondents must therefore
yield to the parameters set forth under Article 14 of the Constitution
of India. Such non-consideration of the representations preferred by
the writ petitioners without justified reasons will have to be held to
be arbitrary and contrary to the scheme of Article 14 of the
Constitution of India.
99. This Court therefore holds that the projection of the
respondents that in extending the benefit to Varun Beverages while
the application of the petitioners remained unconsidered was based
upon reasonable classification cannot be accepted in the absence of
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any materials placed before this Court as to how this reasonable
classification was arrived at. If that be so, then the grievances of the
petitioners must certainly be redressed by issuing appropriate
direction to the respondent authorities to consider the claim the
petitioners ventilated through to the applications filed before the
authorities in terms of the 2019 scheme as it stood prior to its
amendment in 2020 by the impugned Notification. Since it is seen
that the challenge made to the amendment on the ground of
violation of Article 14 emerge from the non consideration of the
representation, the grievance of the petitioner can be appropriately
redressed by issuing specific direction to the respondent authorities
to consider their claims Under the 2020 Scheme as it stood prior to
its amendment by way of the impugned Notification dated
30.12.2019. It is ordered accordingly. While considering such
representation, the Respondents will give due consideration to all the
attending facts and circumstances as have been done in cases of
other similarly situated units or industries. Since this Court has come
to a finding that the case of the petitioners deserve consideration by
the Respondents in the same manner as other similarly situated units
were given their consideration prior to impugned amendment, there
is no necessity to interfere with the impugned amendment brought
in. If the consideration as directed by the Respondents is given by
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taking into all relevant materials and the yardsticks applied to other
similarly situated units, then this Court is of the view that the same
will adequately redress the grievances of the petitioners.
100. Accordingly, this Court therefore directs the respondent
authorities to consider the claims of the petitioners by applying the
same yardstick as have been done in other similarly situated units
and instances of which is placed before the Court by referring to
orders passed in case of one Varun Beverages. If on the facts and
circumstances as applicable to the writ petitioners their cases are
found to be similarly situated as the other units or industries who
have been given the benefit of extension for the period of exemption
of taxes then similar benefits must be granted to the writ petitioners.
The respondent authorities will consider the claims of the writ
petitioners in the light of the directions granted above within a period
of 60 days from the date of receipt of certified copy of this order.
The respondent authorities will thereafter pass speaking order and
copies thereof shall be served on the writ petitioners.
101. The writ petitions are accordingly partly allowed to the extent
indicated and disposed of in terms of the above. Costs made easy.
JUDGE
Comparing Assistant
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