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2016 Supreme(Bom) 815
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. DHARMADHIKARI & SHALINI PHANSALKAR JOSHI, JJ.
Rajesh Steel Industries – Petitioner
Versus
Development Corporation of Konkan Ltd. – Respondent
Writ Petition No. 3862 of 1996
Decided On : 12-07-2016
For the Petitioner: Mr. P.C. Joshi and Mr. N.B. Shah.
For the Respondent: Mr. V.A. Sonpal, Special Counsel.
The main legal point established in the judgment is the protection of vested rights and the application of promissory estoppel in the context of the retrospective application of tax laws. The judgment emphasizes the principle that the retrospective application of laws should not divest parties of their vested rights, especially when based on the terms and conditions of an industrial policy.
Headnote:
Constitutional Validity - Maharashtra Sales Tax Act - Section 41B, Rule 31AA - 1983 Scheme - [Calculation of cumulative quantum of benefits under Package Scheme of Incentives] - [Section 41B, Rule 31AA] - The court discussed the constitutional validity of Section 41B of the Maharashtra Sales Tax Act, 1959 and Rule 31AA of the Maharashtra Sales Tax Rules, 1959, as amended from time to time, to the extent of their retrospective application from 01.01.1980. The court analyzed the dispute regarding the calculation of Notional Sales Tax Liability for units established under the 1983 Scheme and the impact of the introduction of Section 41B and Rule 31AA with retrospective effect. The court highlighted the conflicting interpretations of the method for calculating the cumulative quantum of benefits and the vested rights of the petitioners under the 1983 Scheme. The court referred to the relevant provisions of the 1983 Scheme, Section 41B, and Rule 31AA, and emphasized the principles of promissory estoppel and the protection of vested rights. The court relied on the judgment in Prasad Power Control Pvt. Ltd. and Another Vs. Commissioner of Sales Tax, Mumbai and Others, (2011) 41 VST 436 (Bom) to establish the legal framework and precedent for the decision.
Fact of the Case:
The petitioners challenged the Constitutional validity of Section 41B of the Maharashtra Sales Tax Act, 1959 and Rule 31AA of the Maharashtra Sales Tax Rules, 1959, as amended from time to time, to the extent of their retrospective application from 01.01.1980. The dispute arose from the calculation of Notional Sales Tax Liability for units established under the 1983 Scheme and the impact of the introduction of Section 41B and Rule 31AA with retrospective effect. The petitioners contended that the retrospective application of these provisions affected their vested rights under the 1983 Scheme.
Finding of the Court:
The court found that Rule 31AA, to the extent it directed the computation of the cumulative quantum of benefits by ignoring the exemption provisions under the sales tax law, was repugnant to the industrial policy as declared by the State in the 1983 Scheme. The court held that the retrospective application of Rule 31AA, which sought to divest the vested rights of the units established under the 1983 Scheme, was illegal and contrary to law.
Issues: The main issue was the Constitutional validity of Section 41B and Rule 31AA of the Maharashtra Sales Tax Act, 1959 and the impact of their retrospective application from 01.01.1980 on the vested rights of the petitioners under the 1983 Scheme. The dispute revolved around the conflicting interpretations of the method for calculating the cumulative quantum of benefits and the protection of the petitioners' rights under the 1983 Scheme.
Ratio Decidendi: The court applied the principles of promissory estoppel and the protection of vested rights to hold that Rule 31AA, to the extent it directed the computation of the cumulative quantum of benefits by ignoring the exemption provisions under the sales tax law, was repugnant to the industrial policy as declared by the State in the 1983 Scheme. The court emphasized that the retrospective application of Rule 31AA, which sought to divest the vested rights of the units established under the 1983 Scheme, was illegal and contrary to law.
Final Decision: The court made the Rule absolute, holding that Rule 31AA, to the extent it was repugnant to the industrial policy and sought to apply to the units established under the 1983 Scheme retrospectively, was illegal and contrary to law.
SHALINI PHANSALKAR JOSHI, J.
1. The challenge in this writ petition is to the Constitutional validity of Sections 41B of the Maharashtra Sales Tax Act, 1959 ('Act' for short), as also Rule 31AA of the Maharashtra Sales Tax Rules, 1959, as amended from time to time ('Rules' for short), to the extent of their retrospective application, from 01.01.1980.
2. The petitioners have also challenged the validity of assessment orders passed on 20.10.1995. However, challenge to the same is, subsequently, given up by learned counsel for the petitioners as the petitioners have already preferred the appeals against the said assessment orders before the competent appellate authority under the Act. The challenge raised in the petition to Constitutional validity of Section 41C of the Act is also subsequently not pressed into submission.
3. The basic dispute raised in this petition is, when an unit is established as per the Government Resolution dated 04.05.1983 which provides for a mechanism to calculate the Notional Tax Liability of the unit covered under Package Scheme of Incentives, 1983 ('1983 Scheme' for short), whether a different mechanism for calculating the Notional Sales Tax Liability can be introduced with retrospective effect from 01.01.1980 by inserting Section 41B to the Act and Rule 31AA to the Rules, so as to defeat the rights vested in the units established under the 1983 Scheme prior to the insertion of Rule 31AA.
4. According to the petitioners, Section 41B and Rule 31AA, to the extent they are inconsistent with para 2.11 of the 1983 GR, are bad in law, whereas; according to respondent No.2 Commissioner of Revenue, the method of determining Cumulative Quantum of Benefits ('CQB' for short) laid down under Section 41B read with Rule 31AA is in consonance with the method prescribed under para 2.11 of the 1983 GR and, therefore, no fault can be found with either Section 41B or Rule 31AA.
5. The crux of the dispute is, therefore, whether the full or partial exemption, granted to the industrial units established in pursuance of the 1983 Scheme, from payment of the tax on account of sale transactions can be taken away by the subsequent introduced Section 41B and Rule 31AA, so as to put the industrial units established in remote undeveloped areas in a situation far worse than the units established in the other areas? The necessary corollary to the said question is, 'whether the government can defeat the legitimate expectations which the petitioners had under the 1983 Scheme?'
6. The relevant facts, for deciding these issues, can be stated as under:-
The State had, with a view to achieve development and dispersion of industries outside the Mumbai Thane Pune Belt, evolved various package schemes from time to time, for giving certain incentives to those industries, which may be set up in the backward areas. Under the 1983 Scheme, the entire State of Maharashtra was divided into 4 Groups; Group-A comprising of developed areas where no incentives were made available; Group-B consisting of the areas where some development had already taken place; Group-C covering those areas which were less developed than those under Group-B and lastly, Group-D covering the rest of the areas which were least developed. The Village Dheku in Tal. Khalapur was covered under Group-C under the said Scheme.
7. The petitioners, with the sole object of availing the benefits of 1983 Scheme, established their Small Scale Industrial Unit at village Dheku, Tal. Khalapur for manufacturing iron and steel items like; MS Steel casting, rerolling of bars flats, angles and twisting of bars, channels etc. After satisfying itself about the full compliance of the procedure prescribed under the 1983 Scheme and also after satisfying about final effective steps taken by the petitioners, the 1st respondent Development Corporation of Kokan Ltd. entered into an agreement with the petitioners on 30.03.1989 and the Eligibility Certificate dated 17.03.1989 was issued to the petitione
