IMPORTANT POINT
No vested right as to tax holding is acquired by a person who is granted concession. Any concession given can be withdrawn at any time and no time limit should be insisted upon before it was withdrawn.

Headnote:(i) Constitution of India-Article 166-Purchase Tax Exemption-Retrospective withdrawal of benefit on basis of an executive decision-Permissibility-No vested right as to tax holding is acquired by a person who is granted concession-If any concession has been given it can be withdrawn at any time-Rule of promissory estoppel can be invoked only if on basis of representation made by the Government, the industry was established to avail benefit of exemption-Doctrine of legitimate expectation gives the applicant sufficient locus standi for judicial review-Withdrawal of benefits extended to appellants as subsidy-G.O.Ms.No. 989 dated 1.9.1988 directing discontinuance of purchase tax exemption in case of mills which exceeded ceiling of Rs. 3.00 lakhs during the period of five years-Government letter dated 28.12.1988 which made G.O.Ms.No. 989 operative retrospectively from 1.4.1988-Appellants challenged legality of G.O.Ms.No. 989 and Government letter-Writ Petition-Tamil Nadu Taxation Special Tribunal held that on application of principles of promissory estoppel and legitimate expectation, withdrawal of benefit was not sustainable-High Court held G.O.Ms. and Govt. letter to be valid-State has not taken any specific stand justifying the withdrawal-High Court upheld validity of Government action by placing reliance on files to hold that withdrawal was justified-High Court directed to hear the matter afresh and take a decision-Administrative Law-Evidence Act, 1872-Section 115.
       Held : No vested right as to tax holding is acquired by a person who is granted concession. If any concession has been given it can be withdrawn at any time and no time limit should be insisted upon before it was withdrawn. The rule of promissory estoppel can be invoked only if on the basis of representation made by the Government, the industry was established to avail benefit of exemption. (Para 7)
       A person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that legitimate expectation gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a person s legitimate expectation is not fulfilled by taking a particular decision then decision maker should justify the denial of such expectation by showing some overriding public interest. (Para 8)
       While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give impression that it was so done arbitrarily or by any ulterior criteria. (Para 9)
       Where a particular mode is prescribed for doing an act and there is no impediment in adopting the procedure, the deviation to act in different manner which does not disclose any discernible principle which is reasonable itself shall be labelled as arbitrary. Every State action must be informed by reason and it follows that an act uninformed by reason is per se arbitrary. (Para 10)
       If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed. (Para 16)
       Clause (1) does not prescribe how an executive action of the Government is to be performed; it only prescribes the mode under which such act is to be expressed. While clause (1) is in relation to the mode of expression, clause (2) lays down the ways in which the order is to be authenticated. Whether there is any Government order in terms of Article 166; has to be adjudicated from the factual background of each case. (Para 18)
       In view of the factual position recorded by the High Court that at the point of time the appellants units were set up and the commercial production started there was no assurance or promise. The doctrine of promissory estoppel had no application to the facts of the case at that stage. We find no substance in the plea that before a policy decision is taken to amend or alter the promise indicated in any particular notification, the beneficiary was to be granted an opportunity of hearing. Such a plea is clearly unsustainable. While taking policy decision, the government is not required to hear the persons who have been granted the benefit which is sought to be withdrawn. The question of legitimate expectation arises according to the appellants after the benefits were granted by the concerned G.O.Ms. At this juncture we would like to take note of certain factual positions highlighted by the appellants which are practically undisputed by the respondents. Contrary to what the High Court has stated, it appears from record that counter affidavits were filed. The reasons which have weighed with the High Court to uphold the action of the State were not pleaded before the High Court specifically, and the High Court cull out those from the files which were produced before it. Though the appellants were not entitled to any opportunity of hearing before alteration of the benefits flowing from the notifications or withdrawal of any benefit, yet when the State has not taken any specific stand justifying the withdrawal and the High Court referred to the files to put its seal of proof, notwithstanding non-requirement for granting any opportunity before the withdrawal, principles of natural justice certainly were applicable, since the High Court with reference to the files recorded findings on the basis thereof. As noted above no specific grounds or reasons were indicated to justify the withdrawal in the affidavits filed before the Tribunal or the High Court, as the case may be. As the correctness of factual basis justifying withdrawal is in issue, fair play certainly warranted grant of opportunity to the appellants to present its side of the picture. Further, a definite plea was taken that there was no scope for retrospective withdrawal of benefit by an executive order. The High Court has not dealt with the issue. The same also needs to be examined. (Paras 21 to 23)
       Above being the position, decision of the High Court by placing reliance on the files to hold that the withdrawal was justified, is not tenable in law and in the fitness of things, the High Court should hear the matter afresh and take a decision on those two issues. It is made clear that we have not expressed any opinion on those issues on the facts of the present case. (Para 24)
       (ii) Evidence Act, 1872-Section 115-Promissory Estoppel-Rule of promissory estoppel can be invoked only if on basis of representation made by the Government, the industry was established to avail benefit of exemption-Doctrine of promissory estoppel represents a principle evolved by equity to avoid injustice-In order to invoke doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself.
       Held : In order 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 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. 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 in the mind of the Court. (Para 19)

JUDGMENT

Arijit Pasayat, J.-These two appeals involve identical questions and, therefore, are disposed of by this common judgment after noticing the factual position, so far as they are relevant. The appellants question correctness of the judgment rendered by a Division Bench of the Madras High Court which held that the withdrawal of benefits extended to the appellants as subsidy was in order. The appellants questioned legality of the G.O.Ms. No. 989 dated 1.9.1988 directing discontinuance of purchase tax exemption in case of mills which exceeded the ceiling of Rs. 300 lakhs during the period of five years, and Government letter dated 28.12.1988 which made the aforesaid G.O.Ms. No. 989 of 1.9.1988 operative retrospectively from 1.4.1988. Initially the writ petitions were filed before the High Court, but after constitution of the Tamil Nadu Taxation Special Tribunal (hereinafter referred to as the Tribunal ) the writ petitions were transferred to the Tribunal which held that on application of the principles of promissory estoppel and legitimate expectation, the withdrawal of benefit was not sustainable in law. The State questioned correctness of the judgment before the High Court which, as noted above, held the G.O.Ms. and the Govt. letter to be valid, reversing the conclusions arrived at by the Tribunal. The judgment forms subject matter of challenge in these appeals.

2. In support of the appeals the primary stands raised by the appellants are :

1. The doctrines of promissory estoppel and legitimate expectation were applicable to the facts of the case. There was no material to show existence of any overriding public interest to rule out application of the aforesaid doctrines there was no scope for retrospective withdrawal. In any event, before withdrawal of the benefits, no opportunity of hearing was granted. The High Court erroneously came to hold that the State Government had not filed any counter. The materials which were produced before the High Court and on the basis of which it was decided that the decision of the Government is in order were not even pleaded in the pleadings and during arguments. The appellants were taken by surprise by production of materials which were not even disclosed to the appellants. The contents of the files which were produced before the High Court and on which reliance was placed to hold against the appellants are not known to the appellants. In other words, there was clear violation of the principles of natural justice. The Government s letter dated 28.12.1988 refers to some decision, but in the absence of any authentication as required under Article 166 of the Constitution of India, 1950 (in short the Constitution ) the same is ineffective. In any event, the retrospective withdrawal of the benefit on the basis of an executive decision is impermissible.

3. In response, learned counsel for the respondent-State submitted that the appellants have failed to adduce any evidence or material to show that they were in any way induced by any governmental action to set up industries. In fact, the Government of Tamil Nadu vide G.O.Ms. No. 1294 dated 24.10.1975 granted exemption from purchase tax on sugarcane in favour of sugar mills established in "co-operative and public sectors" in the form of annual subsidy equivalent to purchase tax on sugarcane. There was no scope for any mis-understanding that it applied to any private sector participation in the sphere of sugar manufacturing. The commercial productions were started in case of appellants in C.A.No. 8606/2002 i.e. Ponni Sugars (Erode) Ltd. v. Govt. of Tamil Nadu & Ors. on 27.1.1984 and in C.A. 8605/2002 i.e. Bannari Amman Sugars Ltd. v. Commercial Tax Officer & Ors. on 22.1.1986. The appellants only made representation to Government subsequently claiming exemption at par with the cooperative and public sector mills. As there was no inducement or assurance, the question of any promissory estoppel did not arise. So far as legitimate expectation aspect

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2004 Supreme(SC) 1451

IMPORTANT POINTNo vested right as to tax holding is acquired by a person who is granted concession. Any concession given can be withdrawn at any time and no time limit should be insisted upon before it was withdrawn.

Cases Referred (18)

IMPORTANT POINT
No vested right as to tax holding is acquired by a person who is granted concession. Any concession given can be withdrawn at any time and no time limit should be insisted upon before it was withdrawn.